Moody’s Down Grades Central Falls Again
Monday, June 20, 2011
Central Falls has been continually flirting with the prospect of bankruptcy, evinced prominently last month when the state appointed receiver for the troubled town, Robert G, Flanders Jr. appeared before the Senate Finance Committee, stating that Central Falls needs extreme salary and retirement concessions from its unions to avoid ruin. He went on to say that the city was nearly $2 million short of what it needs to cover current expenses. Even worse, a plan to address $5.5 million in projected debt for next year remains nonexistent.
$80 Million Unfunded Pension Liability
Moody’s reports reflected the worries of Flanders as it stated, “…the mounting challenges facing the city to secure additional liquidity to fund operations is fiscal 2012 and achieve progress toward longer-term structural reforms have increased the probability of a Chapter 9 bankruptcy filing and the potential for a payment default resulting in losses to bondholders.” Moody’s report also cited the $80 million in unfunded pension and benefit obligations. The report went on to cite the mounting fiscal challenges and stressed the need for outside assistance to rescue the much maligned community from financial ruin.
Central Falls recent nomination as Caa1, reflects an overall downward spiral trend. Moody’s first dropped Central Falls to junk bond status in May 2010 when the city’s bond rating was lowered from Baa1 to Ba1, which is just below the investment grade. Only 4 days later, Moody’s bumped the rating even lower to B3. Central Falls now shares its new Caa1 rating with only one other community in the United States: Jefferson County, Alabama, another community experiencing a wealth of fiscal issues. Central Falls is the only community in Rhode Island with receivership status, and it appears that receiving will have to increase if this small community is to survive.
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