Rhode Island Court to Hold Hearing On Receivership’s Constitutionality

Rhode Island Superior Court will hold a hearing Tuesday regarding the constitutionality of the state’s appointment of a receiver to oversee Central Falls’ finances. Motions were filed Monday.

Central Falls Mayor Charles Moreau and the City Council filed a motion for a temporary restraining order against state-appointed receiver Mark Pfeiffer. The plaintiffs contend that a June law allowing the state to appoint the former judge to oversee the city’s governance is unconstitutional and its execution violates their right to due process.

Pfeiffer and the state asked the court to exercise “judicial estoppel” to bar the plaintiffs from challenging the law. They also cited a previous state Supreme Court ruling that upheld the Rhode Island’s right to intervene in local government fiscal problems.

On July 19, Gov. Donald Carcieri and Rosemary Booth Gallogly, acting director of the Department of Revenue, chose Pfeiffer to take over from a court-appointed temporary receiver who had been in charge of the Central Falls’ finances since May.

Pfeiffer is a retired Superior Court associate justice and one of his first acts as receiver was to relieve Moreau of his duties and cut his salary. Moreau is now mayor in name only and can only serve in an advisory role.

He had to surrender his keys to City Hall, as well as a city cell phone and vehicle, and was locked out of the building, according to a memorandum filed by the plaintiffs.

“The lack of notice and a hearing prior to depriving the mayor of his duties and powers as mayor violates the plaintiff’s right to procedural due process under the Rhode Island state constitution,” the memorandum stated.

A memorandum filed on behalf of the defendants argued that the plaintiffs should be barred from challenging the statute because the City Council passed a resolution on June 17 supporting a transition to state-receivership from court appointed receivership.

The memorandum cites the mayor and City Council’s counsel stating that consent was unanimous.

The memorandum called the plaintiffs’ arguments a “disingenuous power play to be restored to pre-new act authority” and said they are “playing cynical games with the court and public at large.”

Central Falls went into judicial receivership in May after projecting a $3 million shortfall in its nearly $18 million fiscal 2010 budget, along with a $5 million budget gap for fiscal 2011.

The city’s debt was subsequently downgraded to junk by Standard & Poor’s and Moody’s Investors Service.

Those developments prompted Rhode Island legislators to enact a law that prevents municipalities from going into receivership on their own and establishes a system for state intervention in fiscally distressed cities and towns. The statute gives the receiver the same powers as elected officials.

The plaintiffs argue that the receiver’s powers are “dictatorial” and violate the state constitution’s provisions for “home rule” by altering the form of local government.

The defendants claim the new act does not alter the form of government of any city or town because the receiver’s tenure, under the act, would be terminated upon written determination of the revenue director that the municipality’s fiscal condition has improved such that a receiver is no longer needed.

The act contemplates a receiver’s tenure as “incidental and temporary,” the memorandum states.

The defendants also assert that the 1994 state Supreme Court ruling Marran v. Baird upheld Rhode Island’s right to intervene in local governments over fiscal matters because “the fiscal collapse of a municipality can affect the entire state’s financial interests.”