The Associated Press State & Local Wire
BYLINE: By DAVID KLEPPER, Associated Press
DATELINE: PROVIDENCE R.I.
The mayor of Providence and the leaders of three city employee unions have struck a deal that would allow the city to suspend automatic cost-of-living pension increases to help it stave off bankruptcy.
Mayor Angel Taveras announced the agreement Wednesday. He said that if approved, the proposal would strengthen Providence’s finances, protect the retirement benefits of workers and prevent a lengthy legal battle between the city and municipal employee unions.
“I hope that history will show this to be one of Providence’s finest hours: the moment when those with the greatest stake in Providence’s future came together to accomplish the painful and difficult work needed to pull Providence back from the brink,” Taveras said in a statement announcing the agreement.
Under the deal, automatic pension increases would be suspended for a decade, future pensions would be capped and the most generous pension plans would be eliminated. The deal would also move retired city workers ages 65 and older into Medicare.
The changes are expected to help the city save $18.5 million next fiscal year.
The proposed changes must be approved by the City Council, retired employees and members of unions representing police, firefighters and city workers.
Paul Doughty, head of the local firefighters union, called the agreement “a bitter pill to swallow” but better than bankruptcy.
“We recognize the position the city is in,” he told The Associated Press. “We feel the alternatives could be even worse.”
City officials had previously approved a cost-cutting pension plan that freezes automatic adjustments for retired municipal workers. That measure was expected to be challenged in the courts.
Under the proposal announced Wednesday, all cost-of-living increases would be suspended until fiscal year 2023. Future pension increases would be capped and only some retirees would be eligible.
The agreement ends a lawsuit filed by retired police officers and firefighters that attempted to block the city from shifting retirees to Medicare coverage to save money.
The city aims to save about $40 million over the next 10 years by moving retirees over the age of 65 to Medicare. Under the agreement the city would agree to pay for some Medicare benefits.
Providence faces a $22.5 million deficit in the current fiscal year.
Taveras has warned that the city faces possible bankruptcy if it can’t reduce pension costs and persuade tax-exempt institutions like Brown University to increase their voluntary payments-in-lieu-of-taxes.
This month, he announced a landmark agreement with Brown under which the Ivy League school agrees to pay $31.5 million more to the city over the next 11 years.
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