East Providence, Rhode Island earned a credit rating upgrade by Moody’s Investors Service for its sound fiscal position. The announcement comes at a time when many other mid-sized cities have suddenly seesawed into deficit territory.
But it has not always been this way for the state capital’s across-the-river neighbor.
Face-to-Face with a Fiscal Crisis
After years of deficits and underfunded liabilities, a state-appointed fiscal overseer concluded that East Providence “fac[ed] a fiscal crisis that posed an imminent danger to the safety of the citizens”. The city was put under financial supervision by the state in 2011.
Time for a New Governing Model
Despite a steady stream of City Managers (six in five years) and well-publicized quarrels among Council members, the City was able to adopt fiscally responsible policies as suggested by its finance team, and in doing so reversed operating results and generated annual operating surpluses.
East Providence voters recognized that the City Manager form of government was too unstable to maintain these surpluses. Meeting future challenges and making critical investments in the community, including the financing and construction of a new high school, would be hobbled by this form of government. The challenges East Providence faced to maintain fiscal stability were great and a Strong Mayor form of government was deemed a better model for meeting these challenges.
Better balance of savings and investment
Greater flexibility around capital raising
Lower cost of capital with rating upgrade
More transparency for analysts/taxpayers
A “Let’s Try This” Approach
Since his election, Mayor Bob DaSilva has taken a hands-on approach to financial management. The City has identified non-essential spend while finding creative savings (e.g., rather than purchasing new ladder and engine trucks, the City acquired two high-quality, pre-owned trucks). Even with its increased focus on spend, funding a new $189 million high school remained a looming imperative for East Providence.
Bringing it All Together
As a starting point, Mayor DaSilva wanted to dig into all areas of spend to identify cost savings, as a first step. The Mayor was also keen to make bold investments that improved the appeal of the City and the quality of its schools. To do this, he had to bring everyone along — Council and community. This was made possible by the City’s adoption of OpenGov Budgeting & Planning suite.
“OpenGov helps us bring it all together, it enables us to both: 1) create a better, more collaborative budget, one that deploys resources more efficiently across departments; and 2) demonstrate to the public, Council, and our bond ratings agency the impact of savings and investments for our city.”
Mayor DaSilva, East Providence, RI
“With OpenGov we can provide a better understanding of the City’s financial position and priorities — how and where we save and invest,” Mayor DaSilva explains.
In 2019, the City also began publishing an interactive budget for its 2020 budget, using OpenGov’s Stories platform, to improve broader fiscal transparency by sharing a clearer, more navigable picture of its financial obligations and priorities.
Providing a Fuller Picture
The City provides its credit ratings agency with the link to its interactive budget on the City’s website so analysts can download any budgets they need for review.
Providing a forward-looking view of a city’s finances is recommended by some credit ratings analysts as a way to improve their understanding of the full financial picture.
Moody’s recognized East Providence’s focus on fiscally responsible policies, the change in the form of government, and the administration’s focus on savings when it provided an A1 investment rating. Moody’s says that the upgrade reflects “strong cash and fund balance levels, low debt burden, and new management structure.”
With its lower cost of capital, East Providence can better meet its debt obligations for the new high school, which stands as an important investment aimed at making the City more attractive to families.
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