And it includes a provision that forgives the school district's last $1.3 million debt reduction payment, finally clearing the way for Cranston Schools to be liberated from the binds of a consent order and the Basic Education Plan, putting to rest a lengthy saga that began years ago after the district lost a Caroulo lawsuit and was forced to repay the city millions.
The budget is a reflection of a major turnaround of the city's finances thanks to collaboration between the city, unions, the school district and economic growth, Fung said, and the lack of a tax increase yet again comes as the city's bond rating just ticked upwards and the city is poised to fully fund its annual pension and other post-employment benefit payments next year.
"This budget is evidence that communities can operate without raising taxes while maintaining and improving its infrastructure," Fung said in his budget presentation to the City Council. "This is my sixth budget address to you since I was first elected Mayor in 2008. As we all know, back then Cranston was facing a severe economic and budget crisis. Today, I am proud to report that by working together, we have achieved a remarkable turnaround in the city’s finances. Cranston is a city on the move and a model of reform for the entire state."
In a speech that had undertones that reflect Fung's ongoing gubernatorial campaign, Fung took plenty of credit for the city's turnaround, citing his negotiated concessions with labor unions, trimming of staff, renegotiating retiree benefits in a landmark deal last year and bringing 1,000 jobs into Cranston as Garden City Center and Chapel View have evolved into premier New England shopping destinations, among other accomplishments.
But Fung also gave credit to city employees who agreed to work with less, the City Council members over the years who "worked with us. . .to reach consensus and together solve the problems facing our city."
"Tonight I could not be more proud of how much we have accomplished," Fung said.
Here is the complete text of the mayor's budget address:
Good evening Council President Lanni, Members of the City Council, City employees, and residents of Cranston.
Ladies and Gentlemen, I am pleased to come before you tonight to offer my FY 2015 budget proposal for the City of Cranston. This is my sixth budget address to you since I was first elected Mayor in 2008. As we all know, back then Cranston was facing a severe economic and budget crisis. Today, I am proud to report that by working together, we have achieved a remarkable turnaround in the city’s finances. Cranston is a city on the move and a model of reform for the entire state.
In the very first days of my administration, it was announced from the State House that we would lose millions of dollars in state funding. We were in the middle of a budget year when the sudden and dramatic loss of revenue exposed the reality of inherited structural deficits, enormous unfunded pension and OPEB obligations and a school department that had been operating with no fiscal accountability.
In the years to follow, we lost additional state funds to support the car tax exemption and costs associated with unforeseen disasters such as the floods of 2010. In the face of these challenges, I rallied my team to roll up our sleeves and get to work, and with the cooperation of members of this Council and many others, we have risen up to meet each of these challenges.
I want to take a moment to acknowledge those in my administration and the members of the City Council who have worked with us over the years to reach consensus and together solve the problems facing our City. Tonight, I could not be more proud of how much we have accomplished.
Over the past six years, we have built a solid foundation for the economic revitalization of the City of Cranston. It is my pleasure to report to you tonight that our City remains on the path to recovery.
I am proud to present a budget that protects the taxpayers of our City and reflects our ongoing commitment to efficient and responsible government—a city government of which we all can be proud. We still face many challenges and we cannot afford for even one minute to let down our guard, but there can be no doubt that our sacrifices over the past few years have placed Cranston in a much stronger position today.
Through discipline, economic growth, and fiscal accountability, we have achieved the financial stability that makes our City such an attractive place to live… and do business. Our economic recovery has been a long and difficult struggle and it is important to acknowledge how it came to be.
One of the first, and most important keys to offsetting the dramatic reduction in state aid that I mentioned earlier was a package of concessions that I negotiated with our labor unions, saving millions of dollars in the very first year.
We knew then, however, that concessions alone would not be enough and it was essential for us to make fundamental changes to the nature of public sector employment in the City of Cranston.
Cranston’s long-term fiscal stability depended on an end to ‘business as usual.’ I knew then that we needed to engage in fair, reasonable, and cooperative discussions with municipal employee unions.
Ultimately we succeeded in our efforts and agreed upon comprehensive changes that cut costs and reduced the workforce. For example, the health care co-shares and on-site co-pays for our employees have increased significantly and are getting more in line with the private sector. We also made long term changes to the operation of specific departments, such as employing civilian fire dispatchers and permanently reducing the number of positions to reflect our needs more accurately.
Most notably, we have negotiated innovative and fundamental pension reforms on two fronts. First, new employees within two of our labor unions now participate in 401(k) style defined contribution retirement plans rather than the traditional defined benefit pensions of the past.
These are the plans relied upon by many of our hard working taxpayers who are employed in the private sector, and the savings to our city are dramatic. Instead of an 11.26% contribution to the state pension fund for these employees, Cranston now only pays 3% directly toward the employees’ retirement plan.
Already, we have 21 participants, and as new employees fill vacated positions, the savings will grow. This was one of the first in the State of Rhode Island and offers a clear example of the ways in which Cranston is leading the way to a more responsive and efficient model of government for the entire state.
Additionally, we have achieved immediate and dramatic savings in pension contributions as a result of our recent negotiations with Police and Fire retirees and unions in the “old” locally administered city pension system. Through responsible negotiations, we have reformed benefits to produce a savings of over six million dollars in just this current year – with continued savings for years to come.
We continue to find innovative ways to increase efficiency in city operations to conserve taxpayer dollars.
The hard work and sacrifice of everyone involved has paid off, and I am proud to say that the budget I am presenting tonight funds 100% of the City fire and police pensions and OPEB. Let me reiterate, we are funding 100% of our pension and OPEB obligations.
Sadly, however, I cannot say the same about the state pension system. Of course, we pay 100% of our pension obligation to the State, but unfortunately, the cost for Cranston taxpayers is increasing again. This reflects the larger pension issues confronting our state, which result in increased cost to the taxpayers of Rhode Island.
That is why I continue to speak out loudly and strongly in favor of statewide pension reform and against that proposed pension settlement.
Let me stop for a moment here and point out a critical fact . . . we froze taxes in both the 2013 and 2014 budgets, and through prudent operations, we achieved surpluses in 2012 and 2013, and we are on track for a balanced budget in 2014. And we will continue to watch every penny in the 2015 budget.
One example of where we have made operational changes is in trash collection. As a result of moving to an automated collection program, we will save more than $130,000 in our refuse removal program.
Additionally, the experience in other communities shows that the new bins should enhance recycling rates, which would increase our revenue from Rhode Island Resource Recovery’s rebate program and would help to avoid any penalties for inadequate recycling. Tonight’s budget demonstrates another sign of our success. In 2014, we saw increased revenues from the City Clerk’s office and Building Inspections. These revenues reflect increased activity in real estate and licensing and indicate real business development in our city. These are strong signs of the economic revitalization of our community.
Our success is further evidenced by the more than 1,000 jobs that we have brought into Cranston over the past few years – and massive growth in our retail and office locations like Garden City and Chapel View. The corner of Sockanossett Cross Road and New London Avenue is truly a destination location for people from all around Southern New England.
Clearly, the influx of small business into Cranston, and the continued commitment to growth in our City demonstrated by developers indicate their realization that we are economically stable… and open for business!
Our economic stability is further evidenced by the fact that all three bond rating agencies rate Cranston’s bond status as an “A” rating with a Stable outlook. Moody’s was the most recent to upgrade our status, and indicated in its public statement that our city’s pension reform was critical to their positive analysis.
There is one more factor, of note, to support our “A” rating. An economically sound community with a budget our size should have an unrestricted fund balance of at least 8% of its budget. We earned our “A” rating by amassing a $22 million in our Rainy Day Fund, just under 9% of our annual budget.
In the past, rating agencies have questioned our ability to address deficit spending by our School Department. With strong oversight by the City’s Finance Department, our schools are operating far more efficiently and have repaid substantial debt incurred over several years. Tonight’s budget rewards that efficient operation and fiscal discipline.
Provided that the School Department makes the agreed upon repayment for the current year, continues to watch their expenses and finishes with a balanced budget, my proposal would be to forgive next year’s approximately $1.3 million dollar repayment, freeing those funds for them to use elsewhere.
Once again, we face a substantial loss in state revenue, although we are better suited to overcome this loss than we were in the past. Next year, Cranston stands to lose over $1.2 million in state aid reserved for distressed communities.
But even this cloud on our horizon has a silver lining. While we are disappointed with the loss of revenue, we will manage. The loss of that “distressed community” designation will increase confidence to encourage even more businesses to consider moving here. We are no longer a distressed community – rather, we are a city on the move.
Efficient operation of city government, fundamental changes in employment and retiree benefits, consolidation and cost cutting at every opportunity, and a cooperative approach to moving our city forward: these have been the hallmarks of my administration.
I am proud of the results, achieved by working in cooperation with all of you. We have created a city government that is efficient, accountable, and effective. And I am able to announce proudly tonight that for the third year in a row, I am proposing a budget that puts the taxpayers of Cranston first and includes NO TAX INCREASE YET AGAIN!
We anticipate collection rates consistent with current rates, and to offset expenses such as increased State Pension costs, we have identified several positions to remain vacant. As always, we will operate as lean and efficiently as possible.
By watching our capital expenses and managing debt carefully, we have more than $2 million to pave road roads and repair storm drains. We propose major renovations at our middle schools and will support a $15 million bond referendum for school renovation, including fire system upgrades.
This budget is evidence that communities can operate without raising taxes while maintaining and improving its infrastructure.
In closing, I want to say again that I am humbled to serve as Mayor of this great City and to have been entrusted by the people of Cranston to restore our fiscal health and to revitalize the economy of our City. Through strong leadership and with the cooperation of all involved –
employees, labor unions, the school department, and most importantly, the people of Cranston—we continue to build a legacy of leadership and achievement. Thank you to the Members of the Council and citizens of Cranston for your time – and more importantly, for your continued support and trust in my administration.
I am proud to be your Mayor and proud of all that we have done as Cranston moves forward to fifteen and beyond. We truly are a city on the move and a model for the entire State of Rhode Island.