Bankruptcy is no easy way out for Rhode Island’s cash-strapped cities and towns, and taxpayers should not see it as a way to avoid a rate hike, according to two legal experts.
“It would be a mistake to think tax increases would not be a part of a state restructuring plan,” said Robert G. Flanders Jr., who serves as receiver in Central Falls, at this point the only community in the state to petition for bankruptcy protection. “There’s a lot of pain and difficulty to slog through. … When I talk about restructuring, I’m talking about cutting spending, and the biggest part of restructuring is cutting personnel.”
Michael A. Kelly, the Providence lawyer who challenged the law that allowed a receiver to take over Central Falls, called it “total authority, a dictatorship really. There’s no legislative branch, no executive branch. The mayor, the city council, all the city boards and agencies, they’re reduced to an advisory capacity.”
The two lawyers shared their opinions recently, during separate visits to Woonsocket, another Rhode Island community where the state could take control of finances. The once-bustling mill city is facing a $10 million budget deficit, and sometime this spring property owners will likely be hit with an extra tax bill that will boost the rate by 13 percent.
That prospect has many homeowners loudly demanding the city quit trying to straighten the mess and instead dive straight into bankruptcy.
“I tell you, 50 or 60 percent of the people in Woonsocket can’t afford to pay the supplemental tax,” City Councilor Roger Jalette, one of the few elected officials to endorse filing for bankruptcy, said at a recent meeting. “Most people I talk to want to go with a receiver. He can make the cuts we can’t.”
To ensure city residents understand that route and its consequences, the Woonsocket Taxpayers Coalition invited Flanders to the city late last month to speak to their members and the public. That prompted the City Council to ask Kelly to offer a different perspective with a presentation at City Hall.
Robert G. Flanders Jr.¸ Michael A. Kelly,
Standard & Poor’s Ratings Services,