[Summit] Vote No on #1 - It's a roll of the dice

[Mark Binder]

You may have gotten the postcard today. This is my take:

Vote No on #1.

The proposed Providence Pension Obligation Bond is a gamble. It is another example of elected officials unwilling to raise taxes.
Nobody wants higher taxes, but bonds are a form of invisible deferred taxation. 
Vote NO on this one.

Here’s are three ways you can do this:
1) Apply for mail ballot (Here’s a link: https://bit.ly/3xMsapO). Do this ASAP, because they have to have the application by May 17.
	 Return the ballot by June 7.
2) Vote Early at City Hall - May 18-June 6
3) Vote in person, June 7

The Long Explanation:

I attended a forum on Thursday, June 21, and heard all the arguments:
* Under Cianci, Providence promised huge pensions, but didn’t actually pay into the system.
* Several mayors since then have done little to remedy this. (Not all their fault)
* The pension fund is “only” 24% funded
* There is a (plausible) fear that the pension costs will cut into city services.

The proposal? 
Issue a $500 million bond, and put the money into the pension fund.
In theory, today’s low interest rates, combined with Wall Street’s current high returns will cover the interest on the loan, and result in a small return.
The pension fund will be more fully funded – though not completely. (There would still be $700 million unfunded).
The city's bond rating will remain high (So we can borrow more money at a lower interest rate and avoid raising taxes! Yay!)

The problems with the Pension Obligation Bond:
It’s taking out a loan to pay off part of a loan, except not really.

1) It’s gambling on wall street. If return on investments drop after the bond is issued, then Providence is on the hook for the interest.
(The truism that Wall Street has always performed ignores blips like the Great Depression.)
2) There’s zero mention of repayment of the principal on the bond. At the end of the term, will the pension fund cough up the $500 million? Unlikely.
3) The City’s 2021 Financial Report reported $743 Million in outstanding bonds. This would nearly double that.

Finally, the belief that the pension fund must be fully funded is false. If we maintain revenue flow in, we can cover the pensions.
What about the Cost of Living Adjustments (COLA)? Ok, so that’s a problem. Nobody likes to talk about this, but it’s a short term problem until those pensioners pass away. 
This bond assumes that these people will live forever. It ignores the possibility of any economic downturn or a pandemic.

I know that it’s hard for elected officials to raise taxes – especially in an election year. 
But it would be more responsible in the long term. 

We have a choice. Vote no now, and perhaps pay more taxes, but save our children from that burden.
Or just kick the can down the road. Again. And hope for the best.
- Mark Binder



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Mark Binder • author • storyteller • playwright

Audie Award Finalist for Original Work
Parents’ Choice Gold Award for Audio Storytelling
National Jewish Book Award for Family Literature Finalist

Home: http://markbinderbooks.com/ <http://markbinderbooks.com/> • https://izzyabe.com <https://izzyabe.com/>

Mark Binder  |   P.O. Box 2462   |    Providence   |   RI 02906   |   (401) 272-8707



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