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RI Town Bankruptcy

RI Town’s Receiver Files for Bankruptcy

By Keri Rozansky

America is slowly going bankrupt.  The country has recently lost its Triple-A credit rating, states are struggling with huge budget deficits, and now even cities are considering bankruptcy.  That’s what’s happening in the Rhode Island town of Central Falls.  State-appointed Receiver Robert G. Flanders Jr. has filed for Chapter 9 bankruptcy protection in federal court.  Flanders’ action marks the first time a Rhode Island municipality has ever been declared insolvent.

A large group which included Governor Lincoln Chaffee, several other elected officials, current city employees as well as retirees gathered in the second floor City Council chambers at City Hall to hear the news.

In his presentation, Flanders noted that taxes have been raised to the highest amount allowable and city services have been stripped to the bone.  He says Central Falls can “rise again” out of bankruptcy and become even better either on its own or by consolidating services with surrounding cities.

Central Falls residents won’t see a change in the city’s services right away, but city employees and municipal public-safety retirees are watching in trepidation.  As part of the bankruptcy filing, Flanders voided municipal, police and firefighter contracts.  He plans to cut over 140 retired police and firefighter pensions by 50% in order to save $2.5 million.  The average pension is about $32,000.  The reduction will start in the checks issued at the end of August or the beginning of September.

Flanders also plans to begin requiring both active employees and retirees to kick in 20% for health insurance coverage.  They currently only pay twelve percent.

Firefighter, police and municipal employees’ unions’ lawyers are expected to face the judge in bankruptcy court and ask the judge to rescind the decision to void the contracts.

Governor Chafee hopes the people of Rhode Island will see the move as the state “taking the bull by the horns.”