Letter to the Director of Finance
Mayor Roberto L. DaSilva's Letter to the City
Sept, 17, 2020
Dear Council President Britto and Honorable Council Members,
In accordance with Section 5-3 of the East Providence Home Rule Charter, I am pleased to submit the Administration’s proposed fiscal year 2021 budget. This budget was prepared to not only meet the financial challenges of funding our new high school and fulfilling the fixed contractual employee obligations that pre-date this Administration, but also to reflect the uncertainties and hardships that the COVID-19 pandemic has brought to our City. The pandemic is unlike anything we have faced in generations, and it has adversely affected many of our residents and businesses. Our resolve to address the economic and social disruption caused by COVID-19 is reflected in this proposed budget through our efforts to keep departmental expenditure increases to a minimum while keeping city operations adequately funded to ensure proper responses and precautions needed during this outbreak.
This budget keeps our residents and businesses safe, our city service levels high, our infrastructure in repair, and our parks and recreational facilities maintained, beautiful and enjoyable. While this proposed budget keeps us on a solid, financial footing with our required financial reserve levels fully funded and our most recent Moody’s Bond Rating at an A1 investment grade level, it also facilitates ambitious economic and social development that will make East Providence the best place in Rhode Island to live, work, play and operate a business.
The proposed fiscal 2021 budget recommends General Fund expenditures of $169,051,000, a $4.3 million increase (2.6 percent) over last year’s spending. Of the total General Fund expenditure increase, city operating expenditures increased by $2.6 million (1.6 percent), city funding of the school department rose by $285,000 (.2 percent) and the city appropriated an additional $1.4 million (.8 percent) to fund future debt payments for our new high school.
East Providence’s proposed fiscal 2021 General Fund operating budget reflects tight fiscal management and difficult choices, but also a commitment to fully honor prior contractual obligations with East Providence employees entered into by prior city managers and ratified by previous city councils. Most of the city’s $2.6 million operating expenditure increases are due to these contractual obligations, escalations in non-controllable costs, and prudent decisions to fully fund our annual required pension contributions. The following six items total $2.2 million of the overall city operating increase:
• City regular salaries and other compensation are budgeted to increase by approximately $601,000. The increase is associated with either the contractual two percent salary increases for our police and fire departments or contractual step increases across all departments. The two percent salary increase for Police and Fire alone totaled approximately $500,000. The increase in salaries occurred despite our reducing full-time employees (FTEs) from last year’s budget by seven and delaying the start date for four DPW vacant positions until midyear. No COLA raises have been budgeted for all other union employees, non-union employees, or for our department heads.
• Our police and fire annual required pension contributions (ARC) went up a combined $462,000 mainly due to this administration’s choice to follow our actuary’s recommendation and adopt more actuarially conservative assumptions than what previously had been used to ensure that future generations in East Providence are not unfairly burdened with police and fire pension costs.
• Our healthcare costs for fiscal year 2021 have increased by $682,000 and reflect an 11 percent increase to our health insurance premiums. Health insurance premiums change according to employee claims and recent claims have been high.
• Refuse/disposal costs increased by $209,000 due to the expansion of our automated trash cart program ($155,000) and overall higher tipping and recycling fees.
• Our finance department budgeted $100,000 for new accounting software to replace outdated and unserviceable software programs.
• An $122,000 increase in our general liability insurance premiums for fiscal year 2021.
The increases in fiscal year 2021 operating expenditures were mainly concentrated in our two public safety departments and are primarily with contractual salary obligation increases. Budget fiscal year 2021 Police Department expenditures are $907,000 (5.4 percent) higher than last year and Fire Department expenditures are $760,000 (3.5 percent) higher. Our public safety departments have gone above and beyond to keep our residents and businesses safe during the pandemic. We are proposing in the fiscal year 2021 budget to staff them adequately and to equip them with the tools that they need to keep us safe while also protecting them as they perform their critical duties.
The proposed fiscal year 2021 budget adds $285,000 to the city’s funding of our school department and appropriates an additional $1.4 million to our reserve fund to finance future debt payments for our new high school.
• The School Department presented a very conservative budget proposal that sought no salary increases, but does account for contractually obligated step increases. The School Department budget, however, is contingent upon receiving state funding that will not be fully determined until the state passes its budget.
• We are proposing in the fiscal year 2021 budget to appropriate an additional $1.4 million into the bond payment reserve fund for the city’s new high school. We have also transferred $2.3 million of previous year capital/synchnorinzation fund appropriations into the bond payment reserve fund. We have been regularly meeting with representatives from all disciplines involved in this complex, exciting project. The final amount of state aid for this project will remain unknown until after construction is complete but at a 69 percent reimbursement the city will need to annually cover approximately $7.25 million of debt service. At a 54 percent reimbursement, the city’s annual debt service payment will increase to approximately $8.5 million. With the proposed $1.4 million addition to our bond payment reserve fund along with the $2.3 million transfer, we will have appropriated $5.1 million into this fund for fiscal year 2021.
While our goal in the fiscal year 2021 budget was to cut and/or maintain departmental expenditures wherever possible, we also wanted to maintain high service levels during this COVID-19 pandemic, improve our infrastructure, parks and recreational facilities and position ourselves for economic expansion and necessary future tax base growth. We rejected any requests for new full and part-time positions, cut seven full-time employees from last year’s budget and delayed the start date until mid-year to fill four full-time DPW positions.
On the other hand, we budgeted to fully staff our fire department with a new recruit academy that is now in progress. These badly needed additions to our fire department will help to reduce overtime and enhance their effectiveness in protecting our community. Additionally, we have restructured EEOC/Affirmative Action into its own division in Human Resources. This will help ensure equal opportunity to all individuals across our city regardless of race, sexual orientation and gender.
Our proposed fiscal year 2021 budget calls for a $2.5 million investment in capital. The city has fully funded its reserve requirements required by the City Charter under Sec. 5-15 and we are allocating the required one percent (1 percent) of anticipated operating fund revenue along with past excess operating surpluses to fund this proposed budget’s capital. The city had historically underfunded capital that created and contributed to bad roads, broken equipment, deteriorated infrastructure, and unusable parks and recreational facilities. We are determined to not repeat the shortcomings of the past. Our city needs to constantly upgrade its capital assets to provide the best services and quality of life for its residents and visitors. Capital improvements and enhancements are even more important during the COVID-19 pandemic because our residents are staying closer to home and depend on local recreational venues and services. All of our capital requests are detailed in a separate budget section.
To fund the proposed fiscal year 2021 budget, we are requesting a tax rate that is approximately three percent (3 percent) higher than the current rate. The additional appropriation of $1.4 million to fund debt payments for our new high school makes up about one-third of our proposed tax rate increase. To reduce the tax increase impact on our homeowners, particularly our senior citizens on fixed income, I am proposing in fiscal year 2021 to restore one percentage point to our homestead exemption bringing it from 13 percent to 14 percent. Home ownership is vital to the social well-being of a community and I believe that gradually increasing our homestead exemption back to the level it was prior to the Budget Commission will make East Providence a safer, healthier and more attractive city in which to reside. For the average East Providence single-family homeowner with a property valuation of $232,000, our proposed property tax increase, coupled with the additional one percent to the homestead exemption, will add approximately $87.06 to their property tax bill versus an additional $141.52 without the additional homestead exemption. The proposed one-percent increase to our homestead exemption brings a meaningful property tax reduction for our homeowner taxpayers which is crucial during the current COVID-19 environment.
As this administration submits its proposed fiscal year 2021 budget, I would like to review some of the positive financial achievements that occurred during fiscal year 2020:
• We have fully provided the required 12 percent of revenues in our Budget Reserve Fund and now have approximately $14.8 million in that Fund. Our Budget Reserve Fund will help protect the City against any unexpected reductions in state or local revenues which could occur due to COVID-19.
• We have fulfilled our commitment to fully meet all ARC pension contributions for our MERS and our Police/Fire pension plans. Additionally, the City has a trust fund balance of approximately $22.8 million or OPEB, which is greater than what the state requires, and well ahead of most other Rhode Island municipalities. Our commitment to OPEB and pension funding will help to ensure East Providence’s fiscal health for future generations.
• Moody’s upgraded our bond rating to an investment grade “A1” level citing the city’s strong cash and fund balance, positive debt structure and new form of government. Our higher bond rating will reduce interest rates on our future general fund debt, including the interest rates for our new high school bond.
• The City locked into an attractive 1.5 percent interest rate on the initial short-term borrowing for the new high school saving more than $1.5 million in interest costs and $50,000 in transaction fees.
• The City has learned that construction on the new high school is going very well and that costs are currently on-track to come in approximately $2 million under the $189.5 million budget.
• The City has decreased the annual amount for TANs borrowing from a high of $32 million in 2011 to a current $15 million. The City will always have to borrow some level of TANs but the current lower amount means reduced annual interest payments.
• The city was paid $503,000 for early redemption of water and wastewater bonds issued through the Rhode Island Infrastructure Bank.
• In response to the COVID-19 pandemic the city instituted a successful furlough program saving approximately $400,000, and to date has submitted reimbursement requests to FEMA for $347,000 of COVID-19 related costs.
• Our Fire Department received a $691,000 Assistance to Firefighter FEMA grant that helps defray costs for upgrading their fire safety equipment.
We have accomplished great things in fiscal year 2020 across all of our departments and our proposed fiscal year 2021 budget reflects our commitment to continue this progress. Detailing all of our departmental achievements is beyond the scope of this letter, so I would like to highlight those in two of our more public interfacing departments: public works and planning.
Our public works department is a best-in-class operation that ensures that essential services including road and infrastructure maintenance, are provided year-round to our residents, businesses and visitors. It accomplishes this in a reliable, professional, responsive and cost-efficient manner. Public works touches all of our lives whether in road and sidewalk repair, trash collections, youth sports or splash park fun. Their dedication during the COVID-19 pandemic has helped make our “new normal” more tolerable and less stressful. Public Works achievements in fiscal year 2020 include:
• Road reconstruction for approximately 12 miles of City streets including main roadways such as Roger Williams Avenue, Centre Street, Lyon Avenue and Grosvenor Avenue. The City will continue its aggressive road reconstruction program in fiscal year 2021.
• New parking lot expansion for the Police Station.
• Construction of a new four-court basketball complex at Pierce Memorial Stadium
• Construction of new ADA sidewalks and installation of new ADA seating at Pierce Memorial Stadium, including new security fencing.
• Installation of a new backstop, scoreboard and sound system at Pierce Memorial Baseball Field.
• Parking improvements at Riverside recreation field
• Improvements at Grassy Plain Park, including significant brush clearing and thinning, construction of a gravel entrance drive, and improvements to the parking area.
• Distribution of over 17,000 new trash containers to all residents and the implementation of a new automated trash collection program.
Our planning department is recognized across the state for its competence and innovation. It has helped lead East Providence to unprecedented economic and building expansion that has increased our tax base and helped minimize property tax increases. In fiscal year 2019 we issued 3,176 building permits and despite the pandemic we have -- in fiscal year 2020 -- already issued 2,665 permits. Our fiscal year 2021 planning department budget will facilitate utilization of our many natural and community resources to help drive East Providence’s economic and social growth to new heights. Recent planning department accomplishments are many and include:
• PACE of Rhode Island, a non-profit that provides services for seniors with complex medical needs, has purchased a new 66,000-square-foot building at 10 Tripps Lane for $3.8 million. The company will be moving its entire operation from Providence to this location in 2021;
• Schiavo Newport Avenue Mixed-Use Development – A rezoning and comprehensive plan amendment has been approved for a mixed use development on Newport Avenue that will include nearly 25,000 square feet of retail and 142 apartment units;
• Igus is preparing to expand its manufacturing operations at its state of the art facility at 257 Ferris Ave. and has continued to maintain full operations during the pandemic. The company now employs more than 400 people at its facility;
• EFD is expanding its operations at 90 Catamore Boulevard after recently receiving zoning approvals for onsite improvements on their property;
• Eaton Aerospace also remained opened and is in a position to add a third-shift once the economy fully recovers;
• Citizens Bank Operations Center in Riverside now employs over 1,000 people and is looking to increase its footprint in 2021;
• Phillipsdale Landing has gone from zero occupancy in 2015 to more than 70 percent occupied with a strong list of quality tenants including EnoTap, We Share Hope, Studio Dunn and Ark Woods;
• The location at 110 King Phillip Rd. has been transformed into a multi-unit live/work space property that hosts a number of artists in a former industrial warehouse building;
• New manufacturing tenants will be occupying significant space on Almeida Way very soon including a foam fill manufacturer and an industrial pipe distributor;
• Ongoing multifamily residential projects include both market rate and affordable housing units at the Residences at Bold Point, Circle Drive, Ivy Place, Sutton Avenue, Taunton Ave lofts and Riverside Square;
• The Odd Fellows Hall has been acquired by a private developer and is currently being renovated into a mixed use development;
• The Wampanoag Meadows multi-family apartment development containing 416 residential units was Master Plan-approved in 2020. Full permitting for the development is expected in 2021;
• Zoll Medical, manufacturer of defibrillators, opened a 41,000-square-foot warehouse and distribution center on Narragansett Park Drive;
• Rental units at Kettle Point are at 90 percent occupancy and a new set of townhomes will begin construction in the fall of 2020;
• The Watchemoket Square Gateway Study is currently underway with an expected completion in the fall of 2020. It is expected that the findings and recommendations from this study will lead to a more vibrant and dynamic downtown square in the heart of East Providence;
• A microbrewery is in the final planning stages to occupy a building on Massasoit Avenue;
• Efforts to improve "in-fill development" along Waterman Avenue, Warren Avenue and Riverside Square will be addressed in a series of zoning reforms that will provide more flexibility to operate in these areas;
• The proposed port at the South Quay for the Off Shore Wind industry received $15 million in Rebuild RI tax credits which represents the largest amount ever awarded under this program;
• RIDOT will begin construction of a new Henderson Bridge that includes a direct connection to Waterfront Drive will begin later this year. The realignment is expected to create dozens of acres of developable property in the vicinity of the Bridge and Waterfront Drive;
• RIDOT will also be commencing with improvements to the Washington Bridge in 2020 that includes the construction of a new, westbound off ramp to Waterfront Drive that will assist in the redevelopment of dozens of acres of land in the waterfront;
• 105 Pawtucket Ave., a distressed former Fram Headquarters, was razed and will be marketed for development;
• A cooperative workforce development program between the City and Roger Williams University has been formalized with resident training opportunities expected to begin this fall;
• The City’s Economic Development Commission and Community Development Office awarded Covid-19 small business assistance loans between April and June of 2020 to assist small businesses adversely affected by the pandemic.
We are living in unprecedented times and this proposed fiscal year budget reflects the economic and social hardships experienced by our residents and businesses from the COVID-19 pandemic. Expenditure increases in this budget have been kept to a minimum and we have either reduced headcount or delayed the hiring of vacant positions. We have recommended a one percent increase to our homestead exemption which will help our homeowners, especially our elderly homeowners, lessen the impact of our prosed property tax increase.
The proposed budget also considers the inevitability that soon our lives will return to normal and we will need to continue to move our city forward to even greater economic and social progress which includes the continued funding of our future high school bond payments. We have accomplished a lot during the past year, but we can do even more to enhance the lives of our residents and the success of our city businesses. The pandemic has slowed us down, but it will not defeat us. East Providence’s best is yet to come, and this proposed fiscal year 2021 budget is the beginning of that journey.
The Administrations looks forward to the workshops and hearings on this proposal, and will be happy to answer any questions that you may have.
Roberto L. DaSilva