Central Falls, Rhode Island Files For Bankruptcy

Tyler Durden's picture

It's not Jefferson County, yet, but it could certainly be seen as the precursor to the first domino. "The state-appointed receiver overseeing the cash-strapped Rhode Island town of Central Falls has filed for bankruptcy on the city's behalf in an effort to help it get back on its feet. Receiver Robert G. Flanders and Rhode Island Gov. Lincoln Chafee announced the step - which Flanders has described as a last resort - at a news conference at City Hall. Flanders filed the legal paperwork seeking bankruptcy protection Monday. "From the ashes of bankruptcy Central Falls will rise again," Flanders said." The biggest losers: unions. "With the city now seeking bankruptcy protection, Flanders said he plans to reduce pension benefits beginning in late August. He has asked the federal court to immediately reject collective bargaining agreements. He said the next set of pension payments will reflect at least the cuts he outlined to city retirees. In addition, he said city workers will face layoffs. Flanders called the step unavoidable, as taxes have already been raised and city services have been cut "to the bone." Expect Barack Obama to thaw Steve Rattner from carbonite explain to creditors, using a variety of four letter words, that they will be last in line of payment after every single union claim has been satisfied, with the resultant husk of a town reverse merged with GM.

"We're not going with a band aid-approach," Chafee said.  "We're going to tackle this and that's a positive."

 

Flanders said he would hope to have a plan of recovery to present to the judge at the outset of proceedings in an effort to prevent a protracted bankruptcy.

 

"We need to come out of this with a sustainable plan for recovery," he said last month after a meeting with retirees.

 

Central Falls, a city of 19,000 residents about a 15-minute drive north of Providence, has $80 million in unfunded pension and benefits obligations and $5 million deficits projected for each of the next five years. The city has found itself the subject of national headlines over its floundering finances and a high school so troubled that all its teachers were fired in one fell swoop last year, but eventually rehired.

 

The mayor, Charles Moreau, and City Council president, William Benson Jr., who were demoted to advisers after the state stepped in last year, have been critical of the receiver. They say it was clear long ago that bankruptcy was the only option.

 

"That's what we wanted to do almost a year and a half ago," Benson said Monday. "It can't be any worse than it is. It just can't."

 

Moreau said the city has no choice. "Unfortunately this is the route we've got to go. At the end of the day, fiscal stability is of the utmost importance," he said.

 

U.S. Bankruptcy Judge Frank Bailey of Massachusetts has been named the judge in the case.

And a video of the bankruptcy announcement, brought to your very, very appropriately by Mario Hilario:

h/t Papa Swamp