Op/Ed: Tunnel Vision and the High-Risk Strategy of Fiscal Crisis

by | Jun 6, 2018

By Eric Kaldor

Dear Town Council President Cienki,

I fear my concerns have little hope of being heard. Still, I will try to one last email. I have sat through many Town Council meetings and believe I have come to understand your perspective and strategy for the town. You have been clear in your argument that the long-term financial situation of the town is unsustainable because of the growth rate of employment costs, particularly pension and related post-retirement benefits. You don’t believe the town and School Committee have effectively negotiated with the unions in the past. Your best leverage point is a budget that has no room to give based on the 4 percent cap on tax levy increase. Cutting tax rates last year and holding rates flat this year is part of your strategy to set up the strongest negotiating position for next year when all contracts are up for negotiations.

I fear you may be like the chess player so focused on capturing your opponent’s Queen, you miss that you are losing the rest of the game.

What are some of the unintended results of your strategy? When I moved to East Greenwich three years ago, all kinds of houses were quick to sell. Over the last year, I notice houses above $500,000 taking much longer to sell. Many are taken off the market to reappear in the next season. This is backed up by some of the property revaluation data. The top 25% of residential properties in Eugene Quinn’s dataset of 3905 residential properties had minimal increases to their assessed value. Residential properties valued at $519,300 and more in 2017 had a median increase in assessed value of 1% (0.987%). That means 50% of those houses had less than 1 increase in their value. The median percent change in valuation for residential homes overall in East Greenwich was 3.5%. The 75% (n=2929) of homes under $519,300 had a median increase of 4.8%.

In a time where Rhode Island like other states is reporting a housing shortage and low unemployment, this is actually worse than it sounds. I support efforts at affordable housing, but this is the top of the residential market not the bottom or middle. As you noted, an increasing share of the rising taxes will fall lower in the market just through revaluation as long as those home prices rise faster. This is not a one-year problem because of the revaluation. This is a long-term problem because of the damage to East Greenwich’s reputation as one of the top school districts in the country.

Even should the Town Council choose to pursue the 4 percent increase in the tax levy, the town’s and school district’s reputations are damaged within Rhode Island. You can count on further eroding of home values with the next few years’ draconian budgets for schools. Tax increases without rising home values are a potential future on the EG horizon.

Three council members make their livelihood on sales, a field where they must always pursue revenue growth. Yet, we have heard no serious plans to diversify the tax base or significantly grow other revenues. For example, the Town Council has spent no time discussing how to leverage the waterfront for more retail and commercial activity. Four of you are fully committed to just one strategy for the town and its is very high risk. Freeze the tax levy. Create a fiscal crisis.

When I listen to Town Manager Corrigan’s presentations, it is clear for me that over the past 20-plus years, previous Town Councils have chosen to borrow or make promises to pay in the future rather than pay the true cost for the certain services and infrastructure they wanted then. These “savings” in the past have increased costs now. Your strategy doubles down on this practice, even as we see the long-term damage from these past practices. This may help you renegotiate labor contracts or your strategy may fail and bring increased legal costs and dramatic increases in future taxes. But I suspect it does not matter, you are committed. You have tunnel vision.

As a voter in town, I would have preferred you openly ran on the strategy of producing a fiscal crisis, but of course this is a stealth strategy that requires you to wink at the insiders and obfuscate for those outside your clique. Silly residents waiting hours to speak to you about concerns that your decisions would create a fiscal crisis. Of course they will. That is the strategy.

Sincerely in opposition to the strategy,

Eric Kaldor

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