East Providence has joined Central Falls as a Rhode Island municipality under state oversight.
Gov. Lincoln Chafee on Monday announced the appointment of Stephen Bannon from the Rhode Island State Police to oversee the finances of East Providence, which has a population of 47,000.
According to Chafee and Department of Revenue director Rosemary Booth Gallogly, Bannon began immediately as fiscal overseer to help balance the budget and work on a five-year plan.
Appointing an overseer is the first of three state interventions for troubled cities under the Fiscal Stability Act of 2010.
Also Monday, Moody’s Investors Service placed the city’s Baa1 general obligation rating on review for possible downgrade, affecting $22.4 million of debt. Moody’s had lowered its rating from A1 on Aug. 11. The outlook is negative.
Moody’s concurrently placed the Rhode Island Health and Educational Building Corp.’s public schools revenue financing program revenue bonds, Series 2007C pooled issue, on review, affecting $11.5 million of debt. The city, is responsible for a portion of debt-service payments on that issue, Moody’s said.
The city must close a $7.3 million budget deficit. It has proposed a plan to cut the gap to $3.2 million, a hole Bannon expects to close.
The plan may include a deficit-elimination bond issue, said City Manager Peter Graczykowski.
East Providence’s overall budget is $122 million, with schools consuming 60%. The city owes Bradley Hospital, which is part of the Lifespan Rhode Island network, $5 million for special education services.
On Monday, after the school district paid Bradley $1.2 million, the hospital said it would continue services while the city works out a plan.
Moody’s reported in August that underfunding of the annual required contribution, combined with underperforming fund investments, has caused the funded ratio of the pension plan to fall to 47.8%, or $59.6 million funded out of a $124.6 million liability. The General Assembly on Thursday will resume debate over an overhaul to its pension system.
Unlike Central Falls, where the power of receiver Robert Flanders has been a source of contention — Flanders essentially stripped the mayor and City Council of their powers, then entered the city into Chapter 9 bankruptcy protection on Aug. 1 — the theme at a press conference in East Providence Monday was cooperation.
Receivership, as in Central Falls, is the third and final form of state intervention. Under an overseer, the city’s elected officials and managers retain authority. “I’m here to help and collaborate on this issue,” said Bannon, a state police major and 24-year veteran of the force, who serves as its chief administrative officer.
Graczykowski and Mayor Bruce Rogers also agreed to help. “We are encouraged to be working with the state,” Graczykowski said.