- Associated Press - Thursday, February 2, 2012

PROVIDENCE, R.I. Mayor Angel Taveras painted a bleak picture Thursday of the city’s finances, saying Providence faces “devastation” and could go bankrupt if retiree benefits aren’t cut and tax-exempt institutions such as Brown University don’t pay more in lieu of taxes.

Mr. Taveras said that he cut a projected $110 million deficit for the current fiscal year to less than $30 million, but that the city is on track to run out of money by June. He said taxpayers and city workers already have sacrificed - taxes and fees have gone up, several schools have been closed and there are 200 fewer people on the city’s payroll compared to a year ago - and he called on retirees and nonprofit hospitals and universities to do the same.

“Everyone must sacrifice or everyone will suffer the consequences,” he said at a news conference at City Hall. “We need everyone to be part of the solution.”

He said the city can’t afford retirees’ guaranteed annual cost-of-living increases - about 600 retirees get increases of 5 percent and 6 percent - and that benefits will be cut one way or another, either voluntarily or possibly through court action. He suggested the city could go the way of Central Falls, R.I., which was taken over by a state-appointed receiver in 2010 and where pensioners’ benefits were unilaterally slashed. The receiver declared bankruptcy on behalf of the city in August.

“Let me be clear: We will reduce retiree benefits,” Mr. Taveras said.

Mr. Taveras has scheduled a town-hall meeting with city retirees for March 3.

He has also been at odds with the city’s nonprofits over payments they have agreed to make to the city in lieu of taxes. He wants the hospitals and universities, including Brown, to shell out $7.1 million more this year.

The mayor said he expects the Ivy League university to make an additional $40 million in payments over 10 years. According to the city, Brown owns property assessed at more than $1 billion that would bring an estimated $38 million to Providence if it were taxed as a private entity.

A spokesman for Brown was not available to comment.

Mr. Taveras said the city will support state legislation that could compel the institutions to pay up. He supports another bill under which the city could collect property taxes on buildings owned by the nonprofits that are used for purposes unrelated to education or health care.

The city’s budget is $614 million for the current fiscal year, 4 percent less than last year. The city’s bond rating was downgraded in March, from A1 to A3, by Moody’s Investors Service. The downgrading made it eligible for state intervention under a law that allows the state to take over struggling cities’ finances.

One development that prompted Mr. Taveras‘ dire warning Thursday was a court ruling this week that the city cannot force police and fire department retirees to switch to Medicare at age 65 - what the mayor called a “reasonable” effort to save $8 million a year.

The retirees sued last year after the city won approval to move them from the lifetime BlueCross BlueShield coverage provided for in their contracts. They asked the judge to stop the city from implementing the change, and the judge issued a preliminary injunction Monday.

The city is appealing the decision to the state Supreme Court.

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