Central Falls, R.I., plans to sell $2.1 million of deficit bonds to balance its budget under an austerity plan released by its state-appointed receiver Wednesday.

The plan also raises property and motor vehicle taxes, cuts staff, and eliminates a $3.4 million contribution to police and fire pension funds in fiscal 2011 to close a $6.3 million deficit in a $16.8 million spending plan.

"This is not an easy budget, and we understand the strain and pressure it puts on the city's property owners," state-appointed receiver Mark Pfeiffer said in a press release. "Our number-one priority is to return the city of Central Falls back to financial stability while ensuring the safety of the residents of Central Falls."

Last month Rhode Island appointed Pfeiffer, a retired associate justice of the state Superior Court, to take control of the city's finances. The plan, which addresses deficits in the current fiscal year and the fiscal year that ended June 30, does not generally need further approval because the receivership law gives the state-appointed receiver the same powers as elected officials.

Central Falls, a city of about 19,000 people, went into judicial receivership — the state's equivalent of bankruptcy — in May after it projected a $3 million shortfall in its nearly $18 million fiscal 2010 budget, along with a $5 million budget gap for fiscal 2011.

The move prompted Moody's Investors Service to downgrade the city to B3 from Ba1 and Standard & Poor's to cut it to C from BBB-minus. Those developments prompted state legislators to enact a law that prevents municipalities from going into judicial receivership on their own and sets up a system for state intervention in fiscally distressed cities and towns.

Moody's analyst Conor McEachem said he expected to meet with members of the receiver staff in the near future and to release a rating update after that.

The city ended fiscal 2010 with a $5.4 million deficit that includes an unpaid $3.3 million contribution to police and fire pension funds. The receiver said he will address the pension issue in November with a reform proposal.

Central Falls revenue shortfalls in fiscal 2010 were largely due to overoptimistic projections for payments to the city by the Donald W. Wyatt Detention Center, which is operated by the quasi-public Central Falls Detention Facility Corp.

The jail pays to Central Falls surplus revenue — which the city estimated would be $1.2 million last year — but no surplus has occurred since the death of an immigrant detainee in 2008 prompted the U.S. Immigration and Customs Enforcement agency to stop using the facility.

According to a June 15 material event notice, the center has not filed an annual financial statement for 2009, but plans to by the end of the month. The detention facility agency has sold more than $148 million of debt for the center since 1998.

City tax revenue in fiscal 2010 came up $132,651 short and state aid was down $469,589 as the state cut aid to municipalities to deal with its own fiscal troubles.

The fiscal 2011 budget closes a $6.3 million budget gap after reducing baseline revenue assumptions to $14.4 million from the $17.8 million projected in last year's enacted budget.

It raises revenue by $2 million primarily through higher motor vehicle fees and a 10% supplemental property tax increase that are projected to generate $981,000 and $840,883, respectively. The tax increase still needs to go through a statutory process to be enacted because it exceeds a property tax cap, said Amy Kempe, spokeswoman for Gov. Donald Carcieri.

The budget counts on $942,182 in personnel savings through layoffs, salary and benefit cuts, and ending vacant positions. Some will require union concessions.

The budget includes payments of $250,000 to the judicial appointed receiver, Jonathan Savage, who was in charge of the city's finances for two months. His firm, Shechtman, Halperin Savage LLP, billed the city $306,000. The final payment amount will be determined by a judge.

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