Central Falls, Rhode Island Files For Bankruptcy

Zero Hedge ^ | 08/01/2011 | Tyler Durden

[SeekAndFind]

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:

CLICK ABOVE LINK FOR THE VIDEO

[ken5050]

There were several threads last week about the retirees being asked to take 40% cuts in their pensions in an attempt to avert this. Did they agree or not?

And RI and ole Linc doesn't step in to bail 'em out?

[therightliveswithus]

Another domino falls

[353FMG]

Another Decatur, AL? Will the mayor and buddies continue to draw $100,000+ salaries?

[Pining_4_TX]

Prichard(sp?), Alabama, too. Stossel interviewed a retired city worker who has no pension now and at age 66 is working as a security guard for income and health insurance benefits.

The mayor and various bureaucrats working for the city are still being paid handsomely. Politicians made promise they could not keep, and people believed them. When will people ever learn that politicians are liars and opportunists? They will say whatever it takes to be elected.

“These men (in government), in point of fact, are seldom if ever moved by anything rationally describable as public spirit; there is actually no more public spirit among them than among so many burglars or street-walkers.”
~ H.L. Mencken

[Dansong]

It's important to keep our eyes on this: Central Falls could be a test case. If RI and/or the Feds bail it out look for hundreds of municipalities across the nation to do likewise. In other words, the purpose of well-run states, say, like Texas, will be to bail out Michigan, for example. That's spreading the wealth, you see. That's hope and change; that's ONE America!

[CowboyJay]

You do realize Texas has already been the beneficiary of billions in federal bailouts? And Texas is second only to New York for levels of local debt. The Lone Star state could end up being ground zero for the muni debt crisis.