CENTRAL FALLS, R.I. (AP) — 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 CF will rise again," Flanders said.
Flanders had earlier indicated that seeking Chapter 9 bankruptcy protection in federal court might be the only option unless municipal retirees and city workers made major voluntary concessions. Retirees, for instance, were asked to take cuts of up to 50 percent to their pensions, a move they did not accept ahead of last Thursday's deadline, set by Flanders.
Flanders has no power to impose cuts as receiver, but officials say a bankruptcy judge could order pensions modified and contracts voided.
Flanders called the step unavoidable, as taxes have already been raised and city services have been cut "to the bone."
Bankruptcy will allow Central Falls to "reinvent itself as a viable community," he said
Flanders said last month that, if the city pursued bankruptcy, the judge would be appointed by the chief judge of the 1st U.S. Circuit Court of Appeals. He 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 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."
U.S. Bankruptcy Judge Frank Bailey of Massachusetts has been named the judge in the case.
Flanders has asked the court to throw out collective bargaining agreements with city workers. The next set of pension payments will reflect at least the cuts he outlined last month.
City workers will face layoffs, he said.
Municipal bankruptcies are relatively rare, but several jurisdictions have found themselves on the cusp. Jefferson County, Ala., last week postponed a meeting to consider whether to go that route; officials will consider their options Thursday. Harrisburg, Pa., has also been flirting with Chapter 9 in the face of a fiscal crisis.
Vallejo, Calif., filed for Chapter 9 in 2008 and is only now ready to emerge from it. Those proceedings have cost millions of dollars.