To the Editor:

On Monday March 7, the Warwick City Council was joined by the actuarial firm Gabriel Roeder Smith & Co. to make the annual “State of the Pensions Address” to the city council and to interested residents. During the presentation, several interesting observations were made and several facts were discussed at length. The results of these facts, although known to a hand full of residents that pay attention, may be cause for concern for some council members and future pensioners that continue to refuse to see the writing on the wall. 

In what could only be characterized as a surgical deposition, Councilman Merolla, through his extremely thorough line of questioning of Mr. Newton, finally brought the facts out that there are serious concerns to the pension programs in the city of Warwick. Most remarkable is the fact that the city’s own actuary, had no idea who the company is that manages the pension investments. Stunning, to say the least. In Mr. Newton’s own admission, GRS relies only upon the information that is supplied to them by the Mayor and his finance staff and was not privy to see the actual investment reports before assembling his presentation. 

While pension discussions can be complex for some, and have been categorized by some council members as only a “hobby” for others, one thing is for certain, the mathematics do not lie. So let’s take a look at some stunning numbers and make it easy to understand the real problem.

For many years the pension investment return has been has been forecasted at 8%. A few years back after the state underwent pension reform, that assumption was lowered to 7.5%. When GRS was asked by Councilman Merolla to point to a period in time of either 10, or 20 years when the pension system returned that assumption of 7.5%, Mr. Newton admitted that there has not been a period where that average has been obtained. At best, we may be in the vicinity of 6%. The assumption is a critical number in terms of talking about liabilities and payments in to the future. When an unrealistic number such as 7.5% is used in the equation, the net result indicates an unrealistic return, and inaccurate estimates as to how much, you, the taxpayer, are obligated to in terms of your tax dollars to contribute into the pension payments to keep the fund solvent. Mayor Avedisian continually speaks about the self-correcting mechanisms built within the pension system. What he really means, is his ability to raise taxes to generate additional revenue to make up for the shortfall in pension payments needed to prop up a system that is based upon unrealistic numbers. 

Although 3 of the 4 city pension programs are in fair shape, (based upon the inaccurate 7.5% return) with funding on the average of about 8.5%, the resounding problem is the “Police/Fire 1” plan which is only funded at 25% and has huge liabilities. According to the GRS report of 2012 here are some highlights.

The accrued liabilities for the plan as of 2012, according to the report are $311.7 million. The GRS schedule calls for the taxpayer to pay into this plan, $314 million between 2012 and 2026, however, in doing so in 2026 the accrued liabilities will only be reduced by $4.6 million to $307.1 million. Do you understand this math? Contribute $314 million, reduce the debt by $4.1 million. How long can the Warwick tax base sustain such ineptness? This minor reduction is the result of huge yearly increases to the payments which can only be sustained by tax increases across the board and some pretty magical number manipulation. What about the other “healthy plans”? The city can only generate a certain amount of tax revenue to share between all of the budgetary obligations. As more money is funneled into the critical plan, the other plans will have to have to suffer deferred payments and ultimately they too will begin to suffer. If we were then to apply a realistic rate of return such as 6%, the unfunded liabilities skyrocket. No elected official or finance manager wants those facts to be known so the mantra becomes, shut up and pay the bill. 

The state categorizes critical plans as plans that are less than 80% funded. When we calculate the funding percentage of all of Warwick’s plans, we find that combined we have a funding level of approximately 60.1% according to the 2016 GRS report. Now add to that the health care fund that has approximately 290 million dollars of liability with not 1 nickel in the account, and we have reason for serious concern. Amazingly, with zero dollars in the healthcare account, the administration continues to give away “FREE LIFETIME HEALTHCARE.” Prudent fiscal behavior? I think not. It’s OK because your kids will be paying for it long after Avedisian and his crew are gone. That’s reality. 

Now that you’re ready to choke on your Cheerio’s, factor in this. Councilwoman Wilkinson is chair of the finance committee and also sits on the retirement board. On Monday March 7, for the third year in a row, Ms. Wilkinson was unable to pose a single question to the actuary on what by all accounts appears to be a fiscal disaster on the horizon for the taxpayers. She sat blissfully content and unaware of how to formulate the simplest of questions. One would have thought, that of all the council members, the finance chair would have demanded accuracy in reporting and realistic based assumptions. One would have thought that a member of the retirement board would have studied the issue and have a list of questions ready to be clarified, considering all of the consternation and the fact that the simple math doesn’t add up. Not Wilkinson. It seems that she is perfectly content with the elephant in the room, but with such poor attendance of retirement board meetings, there’s no wonder why there wasn’t a question on her horizon. 

As a point of fact, in December 2014, Wilkinson took extraordinary steps to derail a presentation on pensions that was given by Former Councilman Robert Cushman last year in which he illustrated in detail, with official documents, the issues discussed on March 7th. Wilkinson continued in her attempts to discredit Mr. Cushman by repeatedly calling him a “hobbyist” in front of a large audience of adolescent firefighters whose presence unfortunately, was absent of parental oversight. How is it possible that the “ hobbyist” can see the fiscal disaster looming ahead, but the city finance chair is oblivious to the facts and the writing on the wall? I am still trying to figure out what credentials Wilkinson boasts to be finance chair and to sit on the retirement board. Clearly, a formal education in the discipline at hand is not one of the requirements. 

Equally disturbing is that Mayor Avedisian is conveniently absent on each and every occasion that the actuarial firm addresses the council, but even more disturbing is the extreme measures that Councilwoman Wilkinson and Travis have taken to prevent the residents who pay these bills, from asking questions. What are they in fear of? I truly believe that the mayor has ordered his puppets to prevent the residents from having the forum to question the actuary. After all, no elected official will ever acknowledge poor investment decisions. But after witnessing the butchering of the actuary, it has become clear to me that if the mayor pays for a report, he gets the content that he wants as opposed to fact and transparency. 

Within just moments of questioning by Councilman Merolla, the lack of credibility of Mr. Newton and his firm GRS was quite obvious. His inability to answer basic questions and his lack of preparedness of not only content but documentation as well, was an embarrassment. 

With all of the ineptness that there is to pass around, it is all overshadowed by the failure of the council president to command the simplest of understanding any of these issues, but further, once again to go out of her way to prevent residents from asking questions and even stopping a fellow council member from making a motion to allow questions from the audience. As long as this simplistic thought process continues to exist, Warwick will make no strides. It will continue to slip further into financial and urban decay. The time is coming when we will all see the parade of parents on the sidewalk waving goodbye to their children as they leave this place for a place with a brighter future. A place with better schools, better roads, better finances, and elected officials that have the education, background, and credentials to do the job they were elected to do, and not to serve the puppet master. There was one question that I wanted to ask the finance chair but was not given the opportunity in public so I will ask that question now. Councilwoman Wilkinson, as it pertains to Mr. Newton from GRS, after witnessing his presentation, would you consider him a professional, or would you classify him more as a “hobbyist”?

Rob Cote

Warwick