Wednesday, February 26, 2014

Mayor Taveras Magic Pension Math

                                                    Should Providence be investigated ?

        On August 13 , 2013 Ted Nesi trumpeted Providence pension plan returns had been 13.4% in Providence for the year ending June 30.and then described the plan as having $247 million in assets. Yet Providence own actuary showed  assets  $383,881,000 down materially  from  $422,800,000 the previous year.Welcome to the strange world of "Providence accounting"  reinforced by a reporter lacking in proper inquisition, fact checking  and void of analysis . 
           Mr Nesi then dutifully posted the Chart below showing Providence's  positive returns over various periods of time. This ,nearly useless chart, is in direct conflict with the numbers I have looked at and highlighted below in yellow as "extremely misleading accounting".

                                        Riddle -me -this-Mr. Mayor

             How did the city of Providence pension assets go from $427 million dollars, when Taveras arrived on the scene, to only $ 380 million today if they had a  positive return on assets?  Taveras and Nesi show 7% annual returns over the last 5 years. Hmmmm. First ,considering the stock market had risen over 100% during the same period , that's not a very good performance even if was true. Second , and more importantly  how did they manage to lose $47 million in assets  and simultaneously claim a 7% annual  gain on investments? Again welcome to "Enron style" accounting produced by providence and backed up by Taveras buddies in the press.

here's a replay and  link to NESI's shoddy reporting in 2013

Taveras’s 13.4% pension return beats Raimondo’s 11.1%

*      August 13th, 2013 at 2:48 pm by Ted Nesi under Nesi's NotesOn the Main Site

Providence is significantly outpacing the state of Rhode Island in the battle of the pension plans.
Providence’s $247-million pension fund, the second-largest in Rhode Island, earned a return of 13.4% during the 12 months ended June 30 – more than two percentage points better than the 11.1% earned by the $7.55-billion state fund over the same period, according to data obtained from the city by

So lets look at those assets over the last 5 years according to Providence ‘s own reports by their own self selected actuary.

Year end june 30,2009    Pension plan  assets     $405,217,000   cafr 6-30-09 pg49
Year end june 30,2010    Pension plan  assets     $427,891,000   cafr 6-30-10 actuary report  pg 9
Year end june 30,2011    Pension plan  assets     $422,800,000   Buck exp rpt 6-30-11 pg 6
Year end june 30,2012    Pension plan  assets     $383,881,000   cafr 6-30-13 pg50

Year end June 30,2013    Pension plan  assets     $380,484,000   cafr 6-30-13 pg50

 I have also repeatedly  stated that Mr Taveras has been warned against this type of accounting since 2011. Moodys has said Providence discount rate is too high and asset smoothing will not be tolerated., instead Moody's will use the Market Value of Assets.

next blog we will discuss the recent warning by Providence Actuary that backs up my claim that Providence pumped up assets to appear better funded by approximately $57 million dollars.

1 comment:

  1. Michael it doesn't look like you posted on Nesi's blog with this info. I would have linked to this on there at the time if I had been reading your blog.