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With Central Falls Mayor Out, What's Next?

The resignation by Central Falls, R.I., Mayor Charles Moreau and his guilty plea in a corruption scheme was welcome news for observers who say that the city needs a fresh start in emerging from bankruptcy and reassuming local control.

Wednesday’s development, though, throws some uncertainty over the timetable for the city’s transition out of state receivership.

“Without a doubt this signals a very clean beginning for Central Falls,” said white-collar criminal defense lawyer Anthony Sabino, a law professor at St. John’s University. “While this casts a pall over the process with the incumbent administration being indicted, the more positive is that the timing is good. They’re starting a fresh page. The U.S. attorney, in going after the bad guys, has essentially cleaned up local government.”

Moreau and longtime businessman friend Michael Bouthillette admitted to concocting a deal in which Moreau accepted gifts in return for a contract to board up the many foreclosed homes in the 19,000-population city, which spent 13 months in bankruptcy after filing for Chapter 9 protection on Aug. 1, 2011.

The city at the time reported an $80 million unfunded pension fund liability.

Rhode Island revenue director Rosemary Booth Gallogly confirmed Thursday that a special election for Moreau’s successor will be held at a date to be set.

“Mayor Moreau’s resignation closes an unfortunate chapter in Central Falls’ history,” said City Council member James Diossa. “This is a proud community of honest, hard-working men and women who have overcome many challenges.”

Court documents say Moreau circumvented bid requirements by declaring each vacant home an “emergency.”

“We had this issue in Brookhaven [N.Y.] with no-bid contracts,” said Anthony Figliola, the former deputy supervisor for that Long Island town.

Figliola, the vice president of Uniondale, N.Y., lobbying group Empire Government Strategies and a Rhode Island native, said Central Falls will be under a microscope.

“From a Wall Street standpoint, they’re going to look at Central Falls through a corruption filter. There will also be increased scrutiny from the state,” he said.

Figliola also cited variables, notably the special election, in the state-to-local turnover.

“It all depends on who runs the city and the relationship that person has with the state,” he said. “If Central Falls is strong fiscally and the state has a comfort level, then the state could release control back to the city sooner.”

Under the five-year plan of adjustment that bankruptcy Judge Frank Bailey approved two weeks ago, the state is scheduled to transfer operations back to local officials in January. State officials could intervene if the city doesn’t meet budgetary benchmarks.

Moody’s Investors Service has Central Falls’ Caa1 rating on review for upgrade, though its rating is still deep into junk status. Moody’s cited proactive state measures, including a 2011 law that gave bondholders priority in a bankruptcy filing. The Central Falls bankruptcy left bondholders whole, while pension benefits were slashed up to 55%.

“Right now there’s a lot of hope — and some concern — about a post-Moreau, post-bankruptcy Central Falls,” WPRI-Channel 12 political reporter Ted Nesi wrote in a blog.

Moreau, a Central Falls native and longtime political fixture, served as mayor for nine years. But then-state receiver Mark Pfeiffer stripped Moreau and the City Council of their powers in July 2010, reducing them to part-time advisors. Moreau appealed in court but lost.

Under local control, which could occur in January, Moreau’s income would have returned to $78,000 from $26,000.

“A native son of undeniable charisma, he’s enjoyed broad support in the city — racking up a series of lopsided victories at the polls. But his flaunting of the law has landed him in all kinds of trouble,” Malcolm Burnley wrote in the Boston Phoenix in 2011.

Moreau, for example, imposed a 9 p.m. youth curfew and police locked up offenders short-term in the maximum-security Wyatt Detention Facility. “It’s kind of unconstitutional, but the parents and police love me for it,” Moreau said at the time.

A message seeking comment was left with Moreau’s lawyer, former House Speaker William Murphy.

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