The bankruptcy case of Central Falls, R.I., opened in downtown Providence on Wednesday, with the attorney for the city’s state-appointed receiver saying things have reached a tipping point.
“If we don’t make the changes so that we have a truly balanced budget, we will drive off the fiscal cliff,” Theodore Orson said on behalf of retired state Supreme Court Justice Robert Flanders.
Central Falls filed for Chapter 9 protection on Monday in the U.S. Bankruptcy Court for the District of Rhode Island in Providence. The city, which takes up about one square mile and whose population is 18,683 has an unfunded pension liability of $80 million.
According to the filing, bondholders carrying $20.8 million of the city’s general obligation debt will benefit from a first lien on ad valorem taxes and the city’s general funds, due to a state law passed in June.
Flanders, who two weeks ago asked retirees to voluntarily cut their pensions, has petitioned bankruptcy Judge Frank Bailey to cut pension costs in half.
“If we don’t make the changes so that we have a truly balanced budget, we will drive off the fiscal cliff,” Orson, a co-founder of Orson and Brusini Ltd. in Providence, told reporters after Wednesday’s session.
“We will have no money to pay pensions and we’ll do like they did in Prichard, Alabama. We’ll just go and say to them, we’ve got no money and we won’t pay.”
Last year Prichard, with a roughly 28,000 population, stopped paying benefits to retired town employes, and some of them, if capable, have returned to work.
Flanders, Central Falls’ third receiver since the state took control in May 2010, also stressed austerity.
“We’ll try to be more efficient and leaner and try to get our overtime under control,” he told reporters. “In a nutshell, we have to find ways to save $5.6 million out of a $16.4 million budget, so basically we’re trying to shrink the city by one-third in terms of its expenses so we can balance the budget.”
