Mayor’s “revenue neutral” fire contract could cost the city $3.6 million

WARWICK, RI — When Mayor Joseph Solomon agreed to a new three-year contract with firefighters late last year, one glaring omission was 2018. According to terms of the 2019-22 contract, IAFF Local 2748 and the city agreed to drop all other proposals except salary for the missing year and leave the pay question up to an arbitration board.

Last week, that issue was settled when the arbitrators ruled that the city owes firefighters a 2.25-percent salary hike for 2018, resulting in a cost of some $480,000 to the city.

That figure split the difference between the city’s offer of 1.5 percent and the union’s request for a 3-percent increase, down from the IAFF’s original ask for 4 percent.

It also left the city further in the fiscal hole for the 2019-22 contract that Solomon has repeatedly called “revenue neutral,” even though his own fiscal note showed it will actually cost more — not less — over the course of the next three fiscal years, to the tune of about $400,000. 

Because taking 2018 to arbitration was a specific term of the new contract, it’s fair to say that those costs are a direct result of the 2019-22 pact.

And those costs are in addition to the $2.6 million arbitration decision against the city stemming from a union grievance over starting a new pension tier in 2011 without negotiating it under then-Mayor Scott Avedisian.

Paying the settlement (instead of appealing it) was also a condition of the new contract, according to Solomon.

Added together, those increases could amount to almost $3.6 million over the life of the contract.

Reviewing Solomon’s fiscal note

First, it’s important to examine the 2019-22 contract’s fiscal note to review what’s in it — and what’s not.

On page 3 (PDF is embedded below), a chart compares the projected fire contract costs in FY20, FY21, and FY22 and shows a reduction of $613,473 in FY20, a further reduction of $189,647 in FY21, and an increase of $407,264 in FY22. 

(The contract includes no raise for 2019.)

As outlined in the fiscal note, those costs include personal days, holiday pay, sick time, pension contributions, overtime, and benefits. 

Under the new contract, all of those areas would be affected by reductions in sick and vacation days and the creation of a new pension tier for firefighters hired after July 1, 2019, and the fiscal note outlines the potential changes in those line items.

Taken together, those numbers add up to an overall reduction of $395,856 compared to the original estimated FY20 contract costs, according to the fiscal note.

Comparison shows higher year-to-year costs

That phrase — “compared to the original estimated FY20 contract costs” — is the point where the mayor’s fiscal note is more notable for what it doesn’t show than what it does.

Adding up all of the line items under “FY 2020 Budget” (something the fiscal note does not do) results in a total of $40,492,780.

The next column shows the expected impact of the new contract in FY20: An overall reduction of $613,473, to $39,879,307 — another figure that does not appear on the fiscal note.

And then, in the column that compares estimated FY21 costs, the note lists the “net change” in each line item and shows reductions compared to those original FY20 costs.

Problem is, the fiscal note already shows a reduction in those costs to reach the updated FY20 figures, meaning the original FY20 costs are essentially irrelevant.

And when the FY21 figures are compared with the updated FY20 numbers, the result is an increase of $363,824 from FY20 to FY21. So, even with the estimated cut in costs for FY20, the new contract essentially gives half of it back the following year.

For FY22, the line items related to the contract add up to $40,900,044, $656,913 more than the costs in FY21. 

Using this year-to-year comparison shows an overall increase of $407,264 for FY20 through FY22 — not a decrease. 

That doesn’t match the “revenue neutral” message that the mayor has touted since announcing the new contract.

Good news tempered by future costs

It’s important to understand that the original FY20 budget numbers were based on the last contract that expired in 2018, essentially taking the old numbers and updating them under the assumption that the same terms would apply in the new pact.

Now, this is not to say that Solomon shouldn’t have compared the original estimates to the impact of the new contract — that’s the right way to show how the new pact compares to the old one.

But because the new FY20 figures are the correct baseline for comparison, the original FY20 numbers stop being useful in looking at future years.

In practical terms, this means that FY21 and FY22 may require tax increases to cover the 2019-2022 fire contract, unless savings can be found elsewhere within those budgets, and the claimed $600,000 in savings for FY20 have taken another hit with the arbitrators’ decision on 2018.

In its ruling, the arbitration board noted the city’s strong financial condition, as shown by the ‘AA’ bond rating from Standard & Poors and the city’s surplus, both of which Solomon said were in poor shape at the beginning of his tenure before claiming credit for their improvements while he was interim mayor for barely 50 days.

The city ended FY18 with $22 million in reserves, according to an audit by Blum, Shapiro that was filed almost 200 days late. Solomon had claimed in his State of the City address last February that the city’s surplus was between $13 million and $15 million.

Conclusion: With the arbitrator’s ruling on 2018, the city is now on the hook for an increase of almost $4 million to pay for the fire contract, a far cry from Mayor Solomon’s “revenue neutral” claims.

Read the fiscal note: PCR-187-19 Fiscal Note