government

Central Falls files for bankruptcy

Posted 8/1/11

(Updated, 1:30 p.m.)

CENTRAL FALLS — The City of Central Falls filed for bankruptcy on Monday morning, immediately voiding current contracts with city workers and retirees, according to Central Falls Receiver Robert Flanders Jr.

The city submitted motions for the court to reject collective bargaining agreements with three unions: police, firefighters and municipal workers. As of this morning, employees retirees are required to pay 20 percent of their medical coverage and higher deductibles.

Pension payments will be greatly reduced, with some seeing their pensions cut by half or possibly more.

Bankruptcy for Central Falls was inevitable, Flanders said at a news conference with Gov. Lincoln D. Chafee.

“Services have been cut to the bone,” Flanders said. “Taxes have been raised to the maximum level 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.”

Filing for Chapter 9 bankruptcy under the federal bankruptcy code will allow Central Falls to renegotiate or refinance its debt. But the federal judge overseeing the case — Chief Judge Frank Bailey of the United States Bankruptcy Court’s Massachusetts district — cannot sell city assets, a common practice with other types of bankruptcy cases, because of 10th Amendment limitations on the federal government’s control over states.

Central Falls was placed under receivership in March 2010. The state passed a law in June of that year officially laying out a process for receivership appointments, which was upheld by the state’s Supreme Court in March 2011. The law allows appointed receivers to file for municipal bankruptcy, which was previously not allowed in Rhode Island.

Central Falls projects $5 million deficits every year for the next five years and faces $80 million in unfunded pensions.

In response to the news, Senate President M. Teresa Paiva Weed said:

“The decision today by the state’s receiver is one which I know was not arrived at lightly yet which has ramifications not just for Central Falls but for our entire state. It is important that the receiver file a plan to bring Central Falls out of bankruptcy as quickly as possible. I am confident that Judge Flanders, working together with the legislative delegation and the residents of Central Falls, can craft a plan which retains the unique identity of the community and achieves the efficiencies necessary for financial stability.”

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