Rhode Island Gov. Lincoln Chafee, after announcing he will not seek re-election, urged his fellow state officials to keep working with the Ocean State’s local governments.

“We’re making a lot of progress with our cities and towns, our distressed communities,” Chafee said at Wednesday’s press conference outside the Department of Motor Vehicles headquarters in Providence. “We have Providence, Pawtucket, East Providence … Central Falls is doing great. But we still have to keep on top of that to keep our cities and towns financially solvent.”

Chafee, a former Republican and independent who turned Democrat in May, stunned Rhode Island politics by saying he won’t seek a second term. It throws the 2014 gubernatorial race wide-open, especially among Democrats, with General Treasurer Gina Raimondo and Providence Mayor Angel Taveras among the probable leading candidates.

Republican Cranston Mayor Allan Fung is another possible candidate and Moderate Party founder Ken Block has said he would run.

Attorney Ted Orson, who represented 19,000-population Central Falls during its 13-month stay in bankruptcy, praised Chafee for his attention to local problems. While under Chapter 9, the city eliminated an $80 million unfunded pension liability by reducing retiree benefits by as much as 50%, with the help of a new state law, spurred by Chafee, that boosts general obligation bondholders’ position in a municipal bankruptcy case.

“Throughout his tenure, Gov. Chafee has demonstrated tremendous leadership and innovation in leading the effort of returning our distressed municipalities to fiscal stability,” said Orson, a name partner at Orson and Brusini Ltd. in Providence. “But for his leadership in the Central Falls’ Chapter 9 case, Central Falls would now be a fiscal disaster rather than a fiscally stable city with five years of balanced budget enforceable by court order.”

Taveras, Raimondo and Fung spoke similarly about the governor. Chafee “understands the need to support cities and towns,” said Taveras.

“Like his father before him, the governor always had Rhode Island’s best interests at heart and was an unfailing optimist during very difficult times,” said Raimondo. “I enjoyed working with him in public life and wish him and his family the best in the years ahead.”

Chafee, who also served in the U.S. Senate and is the former mayor of Warwick, is the son of the late John Chafee, also a former governor and senator.

“I wish him well in his future endeavors,” Fung added. “As far as the governor’s race is concerned, as I’ve said all along, the actions of others will not affect my decision in whether I run for governor or not.”

Chafee, elected in 2010, struggled with low favorability ratings amid many challenges, some of which he inherited. They included a recession, an unemployment rate second only to Nevada’s, the 38 Studios fiasco and the Central Falls bankruptcy.

The governor overhauled the Rhode Island Economic Development Corp. after 38 Studios, a video-game company owned by former Boston Red Sox pitcher Curt Schilling, defaulted on a $75 million loan guarantee the corporation provided in 2010, backed by the state’s moral obligation. Chafee, fearing a backlash from the capital markets over a possible default,  pushed the legislature in the last session to approve funds for an initial debt payment.

His predecessor, Donald Carcieri, pushed for the 38 Studios loan package, which Chafee opposed during his 2010 campaign.

Chafee worked with Raimondo as she championed breakthrough legislation in 2011 that overhauled the pension system for state employees. The law drew praise from the capital markets and from bond rating agencies. Officials estimated Rhode Island could cut its $7 billion unfunded pension liability by about $3 billion over 20 years, and save cities and towns $1 billion over two decades.

Fitch Ratings and Standard & Poor’s rate Rhode Island’s general obligation bonds AA, while Moody’s Investors Service assigns an Aa2 rating.

But Chafee and Raimondo differed over strategy as five public-sector unions sued over the Rhode Island Retirement Security Act, challenging its constitutionality. State Superior Court Judge Sarah Taft-Carter ordered mediation talks, which are continuing under a gag order the judge imposed. The latest meeting was scheduled for Thursday.

While the governor favored exploring “reasonable settlement options,” Raimondo wants Rhode Island to stand firm.

“We should litigate that case forcefully. The law is on our side and we have a very good case,” she said at last year’s Bond Buyer awards banquet in New York.

A compromise could force Rhode Island’s General Assembly to recraft the pension law.

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