PROVIDENCE, R.I. (WPRI) — General Treasurer Seth Magaziner on Wednesday panned Providence Mayor Jorge Elorza’s proposal to borrow up to $850 million for the capital city’s struggling pension fund, warning that it could make a bad situation even worse in the long run.

In a letter submitted to the House Finance Committee ahead of a hearing on the proposal, Magaziner described Elorza’s idea — a pension obligation bond — as “a risky strategy with a mixed track record” and “a gamble.”

“The presentations made by the city’s administration so far have not included either a clear accounting of the potential financial benefit of the proposal, nor a clear strategy for mitigating the risks associated with the proposal,” Magaziner wrote.

The second-term treasurer’s opposition is likely to make it even harder for Elorza to win the backing of top General Assembly leaders for such a large transaction. The two Democrats are both also seen as likely primary challengers next year to Gov. Dan McKee, who has expressed his own concern about a pension bond for Providence.

Elorza unveiled the proposal last month, suggesting the city borrow between $750 million and $850 million at a low enough interest rate that he argues investment returns on the money would more than offset the cost of servicing the debt.

The city pension fund is currently only 22% funded, with a shortfall of roughly $1.2 billion.

“The City of Providence pension system suffers from a history of mismanagement that has led to unsustainable costs and an uncertain future,” Magaziner wrote in his letter.

Elorza and other city officials made their case to Finance Committee members during Wednesday’s hearing, arguing the current interest-rate environment presents a unique opportunity, and that the city’s budget wouldn’t be able to sustain the large increases in annual pension contributions that are currently projected to be required.

“We are on an unsustainable path, and doing nothing simply is not an option,” Elorza said.

“I want to acknowledge head-on that there are risks involved with pension obligation bonds — in fact, this whole conversation is a conversation about risk,” he said. “But those risks with the pension obligation bond, they have to be balanced with the risk of doing nothing. And make no mistake about it, it’s abundantly clear that the risk of doing nothing is very grave and severe.”

Yet Magaziner wasn’t the only one expressing reservations about Elorza’s proposal.

Michael DiBiase, president and CEO of the business-backed Rhode Island Public Expenditure Council think tank, acknowledged that Providence’s pension shortfall “presents an enormous challenge to its financial well-being.” But he questioned whether a pension obligation bond is the solution.

The proposal, DiBiase wrote, “does not appear to be aimed at improving the underlying problem — the city’s massive unfunded pension liability — but rather is intended to reduce the impact of the unfunded pension liability on the budget.”

Former Providence City Councilor Sam Zurier — who was closely involved in efforts to stave off municipal bankruptcy during the mayoral term of Angel Taveras a decade ago — also urged the committee to reject the proposal. He focused on the fact that the bill, as written, does not require voter approval in a referendum the way other bonds do.

“While this proposal could benefit the city if it succeeds, it also brings serious risk to the city’s long-term financial viability,” Zurier wrote. “As a result, I believe it requires the engagement and approval of the Providence voters and taxpayers, who will become responsible for paying off the bond in good times or bad.”

Also weighing in against the plan was Steven Frias, Rhode Island’s Republican national committeeman, who is also a historian and newspaper columnist. In a new column for the Cranston Herald that Frias submitted to the committee, he argued Providence leaders should seek concessions from retirees to shore up the system.

“Providence’s unfunded pension plan is a ticking time bomb,” Frias wrote. “To diffuse it, pension benefits must be reduced.”

The Senate has not yet scheduled a hearing on the pension bond bill, but Assembly leaders have suggested their review of the proposal could extend past the traditional legislative session, which is on track to end later this month.