BREAKING NEWS: Central Falls Files for Bankruptcy
Monday, August 01, 2011
Despite months of efforts by three different high-profile receivers, Central Falls could not be saved from the plight of bankruptcy. Citing fiscal mismanagement that spanned several administrations, the current state-appointed receiver Robert Flanders said he had done everything else he could to cut expenses.
“The current situation is dire, and it necessitates decisive steps to put the city back on a path to solid financial footing and future prosperity,” said Governor Lincoln Chafee at a press conference announcing the bankruptcy filing this morning.
Flanders said he has taken the immediate step of voiding all the collective bargaining agreements the city has with the fire, police, and municipal workers unions. In the absence of those agreements, he has instituted a 20 percent co-share for health insurance premiums for all current employees and retirees, higher deductibles, and severe pension reductions—up to 50 percent cuts in benefits, down to as little as $10,000 annually in pension earnings.
Those changes will remain in effect until and unless a federal bankruptcy judge overturns them.
‘Services have been cut to the bone’
Flanders said such drastic measures were taken after exhausting every other option. “Everything was done to avoid this day,” Flanders said. “Services have been cut to the bone. Taxes have been raised to the maximum allowable. We negotiated with Council 94 and the police and fire unions, without success, attempting to reach voluntary concessions, and we tried in vain to persuade our retirees to accept voluntary reductions in their benefits.”
The city formally filed a petition for relief under Chapter 9 bankruptcy law this morning. Additional documents will be filed later today, followed by a recovery plan for the city finances within 30 days. Flanders said ideally the process will take just six months.
Merger still possible
It’s unclear exactly what Central Falls—the city “with a bright future”—will look like on the other end of the bankruptcy process. Flanders said the goal is to make the city an “attractive bride” for a merger or consolidation of services with a new community. But he said the city also would be in a position to maintain its independence.
“From the ashes of bankruptcy, Central Falls will rise again—a slimmer, sleeker city ready to stand on its own two legs as an independent municipality or to merge, marry, or consolidate services with one or more of its neighbors,” Flanders said.
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