Hebert v. City of Woonsocket
| Decision Date | 02 July 2019 |
| Docket Number | PC 13-3287,No. 2016-77-Appeal.,No. 2016-78-Appeal.,2016-77-Appeal.,2016-78-Appeal. |
| Court | Rhode Island Supreme Court |
| Parties | Glen Hebert et al. v. The City of Woonsocket, by and through its Mayor, Lisa Baldelli-Hunt, et al. |
NOTICE: This opinion is subject to formal revision before publication in the Rhode Island Reporter. Readers are requested to notify the Opinion Analyst, Supreme Court of Rhode Island, 250 Benefit Street, Providence, Rhode Island 02903, at Tel. 222-3258 of any typographical or other formal errors in order that corrections may be made before the opinion is published.
(concurrence begins on page 35)
(concurrence and dissent begins on page 37)
(concurrence begins on page 43)
Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.
Justice Flaherty, for the Court. The defendants, the City of Woonsocket and the Woonsocket Budget Commission (the WBC) (collectively, the City), appeal from a decision and judgment of the Superior Court that granted a preliminary injunction in favor of the plaintiffs, a number of retired Woonsocket police officers. The trial court restrained the City from changing the terms of the plaintiffs' retiree health insurance. On appeal, the City argues that the trial justice erred by finding the following: (1) that the plaintiffs had a vested contractual right to free lifetime health benefits for themselves and their beneficiaries; (2) that the WBC was not empowered with the statutory authority to make changes to the plaintiffs' health care benefits; (3) that the WBC violated the Contract Clause of the Rhode Island Constitution when it required the plaintiffs to pay for their health insurance under a new uniform health care plan applicable toall retirees and employees; and (4) that the plaintiffs established that they suffered irreparable harm. For the reasons set forth in this opinion, we vacate the judgment of the Superior Court.
The essential facts of this case, which are largely undisputed, are as follows. Within the past two decades, the City of Woonsocket has fallen on hard times. The City has been designated as one of Rhode Island's seven "distressed communities," defined as those having the "highest property tax burdens relative to the wealth of taxpayers." General Laws 1956 § 45-13-12. In fact, as of 2012, 19.9 percent of its families lived in poverty, compared with the state average of 9.7 percent; the median household income was $34,518, compared with the state average of $54,900; 72 percent of its students were eligible for a subsidized lunch, compared to just 46 percent for the state average; and 64.9 percent of its students graduated from high school in four years, compared with the state average of 77.1 percent. Moreover, from 2000 to 2010, the City's population declined by 4.7 percent, a time during which the state's population increased by 0.7 percent. The trend was equally distressing in foreclosure rates: in 2009 alone, the City's foreclosure rate was 3.6 percent, more than double the state's rate of 1.54 percent. Ominously, major retailers such as Walmart, Lowe's, and Staples had all left the City.
The City's fiscal woes, perhaps hidden from view, began years earlier, however, when it was confronted with unfunded pension obligations. In 2002, the City faced a pension liability of $81,203,910, but it had only $2,172,718 in assets, or a dangerous 2.68 percent of full funding. In response to the pension woes of Woonsocket and several other communities, the General Assembly enacted legislation—Public Laws 2002, ch. 10—that authorized the City to issue up to $90 million in pension bonds, to be amortized over a thirty year period. See P.L. 2002, ch. 10, §1. The law required, however, that if the City's pension plan then fell below 100 percent funding, the City was required to eliminate that shortfall within five years and return the funding to 100 percent. See id. at § 8.
The bonds that were sold under authority of the legislation replenished the City's pension back to 100 percent funding, but when the Great Recession struck, the pension fund value again declined.1 In the five year period from July 1, 2007, through July 1, 2012, the fund's assets dropped from $90,034,746 to $55,902,219, which caused the assets-to-liabilities ratio to fall below 60 percent and required immediate action under state law.2
In fiscal year 2008, the City was able to contribute only $32,100 of the $2,470,633 that was required by the law; in fiscal year 2010, only $15,612 of the required $7,643,873; and in fiscal year 2012, only $1,006,677 of the required $10,545,371.
That was not the only source of fiscal bad news for Woonsocket. The Great Recession also caused the state to impose budget cuts in municipal aid, which had a direct and disastrous impact on the City's finances. Between 2007 and 2011, the state decreased the City's general revenue sharing and state aid by a staggering $13,164,929, or 22.3 percent. Indeed, in total, the City lost $54,467,452 in state aid from 2007 to 2013. Further, the Woonsocket Education Department was receiving fewer state education funds than it had received in fiscal year 2007,even though the state had initiated a gradual phase-in of increased educational funding in 2012.3 As a result of the decreased funding, the City's budget deficit increased from $197,178 for fiscal year 2008 to $12,247,266 for fiscal year 2010.
The record reveals that the City took drastic measures to address its undeniable fiscal crisis. It increased taxes to the maximum permitted under state law and exceeded that maximum by taxing at or above the statutory 4 percent levy cap for most years between 2008 to 2012; it also had the highest average increase in property tax levies over this period among any of the City's comparable benchmark communities, at 6.44 percent.4 Moreover, the City imposed a trash collection fee in an effort to generate approximately $1 million annually in revenue, and negotiated payments in lieu of taxes with certain local property owners to generate an additional $3.2 million annually.
On the expenditure side of its budget, the City also attempted to reduce its obligations by closing a school, turning off street lights, and abandoning all projects to rebuild its infrastructure and replace equipment except those that required emergency repairs. It also cut back on its contributions to the pension fund, the consequences of which were exacerbated by the reduction in state aid as well as the decline in pension investment income caused by a battered stock market. Even with these actions, however, drastic by any measure, the City continued to experience a budget deficit of roughly $2.5 million.
The struggling City sought and received concessions from many of the collective bargaining units that represented its employees. The police union agreed to reduce staff and lower its expected wage increase. Additionally, it agreed that new hires would be required tomake copayments on their health insurance and, for the first time, that new hires would contribute a 20 percent copayment on health insurance premiums after retirement.
The firefighters union similarly agreed to reduce minimum staffing, implement a twenty-four hour shift, revamp its health care plan design, and use civilians for dispatch services in lieu of firefighters. Those measures with the firefighters union saved over $3.5 million for the City over its three year contract period. That, however, did not end the City's efforts. Woonsocket laid off eleven firefighters in 2009 and was forced to briefly "brownout" a ladder truck in 2010.
Finally, the Woonsocket Education Department unions, which already had made concessions to reduce the City's health care coverage contributions for teachers, paraprofessionals, and other nonteaching personnel, also agreed that their members would make 10 to 20 percent co-share contributions to health insurance costs under a deductible plan similar to a plan that had been accepted by the firefighters union. The teachers also did not receive a salary increase for four years and they gave up altogether a deferred payment that had previously been negotiated for in lieu of a salary increase. Other municipal unions agreed to contribute to health care costs, suspend wage increases for an additional two years, and eliminate positions.
The record reveals that those concessions, as far reaching as they were, did not eliminate the budget deficit and, in April 2010, Moody's Investor Services downgraded the City's bond rating to non-investment-grade Ba1, or what is more commonly referred to as "junk bond status." In an effort to further reduce the deficit, the City, in July 2010, issued $11.5 million in deficit reduction bonds, obligating itself to very high interest rates as a result of its poor bond rating. Although that bond issuance may have resulted in an improved cash flow, it also carried the natural consequence of increasing the City's cumulative debt load to a staggering total of $192,815,937 in fiscal year 2012. At that time, the City's debt ratio was 14.24 percent ofequalized weighted assessed valuations. That was by far the highest in the state; the state average was only 1.47 percent.
Adding fuel to an already blazing fire, in fiscal year 2010, the Woonsocket Education Department experienced a $3 million deficit. By June 2012, that deficit had increased to nearly $9.78 million, leaving the City with a cumulative unassigned fund deficit of $7.146 million. The City sought authorization from the General Assembly to impose up to $6.6 million in a supplemental tax, but that proposal was not passed by the legislature. Payroll checks began to be dishonored, and the City's school committee contemplated ending the school year early because it was simply running out of money.
By the end of fiscal year 2012, the City was responsible for bills surpassing $10.2 million in total, nearly $4 million of which was more than ninety days overdue. At the same time, the City pension fund for...
To continue reading
Request your trial