By Hilary Russ

Jan 29 (Reuters) - Providence, Rhode Island, Mayor Angel Taveras said on Tuesday that the city is recovering after facing insolvency last year, but it still has a $4 million structural deficit.

Taveras inherited a $110 million structural deficit when he took office in January 2011.

Since then, he has reached deals with unions to cut pension and retiree healthcare costs, and struck agreements with nonprofits - including Ivy League school Brown University - to increase voluntary payments to the city in lieu of property taxes, which they don't have to pay.

In his State of the City remarks on Tuesday, Taveras said those measures had shrunk the city's long-term structural deficit to just $4 million from $22 million a year ago.

The city also expects to close out fiscal 2013, which ends June 30, with a balanced budget, Taveras spokesman David Ortiz said.

Last year, Providence had an operating deficit of $15 million.

"The state of our City is getting stronger. Providence is recovering," Taveras said in prepared remarks.

Taveras is expected to present his budget proposal for fiscal 2014 in April.

Some analysts said last year that they thought bankruptcy was inevitable for the city of just over 1 million people.

So far, the tiny city of Central Falls, just north of Providence, is the only city in the state to have filed for bankruptcy. Central Falls' exited bankruptcy after its debt reduction plan was confirmed in September.

Taveras, a Democrat, is seen as a possible challenger to Governor Lincoln Chafee in 2014 elections.

Another Democrat, State Treasurer Gina Raimondo, may also vie for the governorship. She spearheaded state-level public pension reform that has been heralded nationwide.

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