PROVIDENCE, R.I. — Solutions to municipal distress in the United States are as complex as the problem is widespread.
Topics during Monday morning discussions at The Bond Buyer's second annual Symposium on Distressed Municipalities at the Omni Providence hotel ranged from pension liabilities to oversight needs to shared services and consolidation.
Former New York State Lieutenant Gov. Richard Ravitch called municipal debt a longstanding problem that predates the financial meltdown of 2008. According to Ravitch, control boards are necessary because mayors and city managers fail to act responsibly, or act like "cowards." Ravitch, who referenced New York City's financial crisis of the mid-1970s, cited the importance of multiyear forecasting, public education and transparency.
Ravitch cited the paucity of media coverage in New York of that city's unfunded pension liability, which has mushroomed to more than $8 billion from $1 billion over the last 10 years. "I've never seen New York State or New York City retirees mentioned in the papers. The CAFR [comprehensive annual financial report] just isn't widely read."
Vijay Kapoor, director of the labor and workforce practice at Philadelphia firm PFM Group, conveyed a sense of urgency about pensions. "There's a clear realization out there that something has to be done," he said. "And when pensions have run their course, then there's OPEB [other post-employment benefits]. This is not a math problem. You're not solving for X. It needs real people."
Steven Hancox, New York State's deputy comptroller for local government and school accountability, said his office works with localities ranging in size from Long Island's Nassau County to little hamlets in the upstate Adirondacks.
"There are a lot of layers of government in this state," he said. "We look for general fund balance, operating balance, and trends including the use of short-term borrowing for cash flow. We try to avoid draconian measures."
According to Hancox, cities are "pushed into stress by forces that they have no control over," such as declining population.
Shared services, or even full-fledged consolidation, can be a touchy subject, he said.
"There's a whole lot of emotion in this matter of consolidation, even in some of these places where you can't tell if you're in a village of a town. No one wants to put their kid on a bus riding through the mountains for a couple of hours."
But Natalie Cohen, a managing director for Wells Fargo Securities, sees a flip side.
"People hear the mayor say 'my school, my hospital, my town. I'm the mayor of this town and not the mayor of that town,'" she said. "But people will drive to the next town and go to the shopping mall, and fill the till over there. There's a lot of education that just isn't taking place."
Rhode Island, Gov. Lincoln Chafee last year formed a committee on shared services, featuring bankrupt Central Falls, East Providence and Pawtucket. In New Jersey, Princeton Borough and Princeton Township officially merged into one last year.
Richard Raphael, a managing director for Fitch Ratings, said vested interests often impede talk about sharing. "A lot of talk about shared services comes down to 'Oh, we have to share with you.'"