The insolvent city of Central Falls, R.I., will transition from judicially appointed receivership to state receivership under a
Associate Justice Michael Silverstein signed off on the agreement between the state and the city, which keeps Central Falls in the Rhode Island equivalent of bankruptcy.
The deal obviates the need to comply with a state law enacted earlier this month, which creates a three-tiered system to keep distressed municipalities like Central Falls out of receivership. It places them under a fiscal overseer and then a budget committee. Central Falls and the state agreed to skip those initial steps and move straight to the third step in the process, state receivership.
Receivership was the best course of action “because Central Falls is so far down the path,” said Amy Kempe, spokeswoman for Gov. Donald Carcieri. “As the Department of Revenue was able to get information, and in working with the judicial receiver, it became quickly apparent the severity of the fiscal crisis in Central Falls.”
The state receiver, who has not yet been named, can initiate a Chapter 9 bankruptcy, but Kempe said the state is “not even considering that right now.”
The city faces a $3 million current fiscal year deficit on its nearly $18 million budget and projects a $5 million gap next year. A $4 million general obligation tax anticipation note is due June 30.
“We’ll work through the transition, ensuring that the city’s obligations are met, particularly with payroll and the repayment of the Tans,” Kempe said. The transition is expected to take weeks rather than months, she said.
