A receiver appointed by Rhode Island to take over the city of Central Falls’ operations moved quickly on his first day Monday, relieving its mayor of his duties and firing an official.
Receiver Mark Pfeiffer informed Mayor Charles Moreau in a hand-delivered letter that the elected official’s duties would be limited to serving in an advisory capacity and his salary cut as the receiver assumed the mayor’s duties and functions effective immediately.
He also fired the city’s director of personnel, stating in a letter that Gene Noury’s services were no longer needed because the receiver would have his own staff.
Moreau is under investigation by federal and state authorities.
Pfeiffer and his team met with city officials for the first time since Gov. Donald Carcieri and acting director of the Department of Revenue Rosemary Booth Gallogly picked the retired superior court judge for the role on Friday.
The city went into judicial receivership 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.
Those developments prompted state legislators to enact a law that prevents municipalities from going into receivership on their own and sets up a system for state intervention in fiscally distressed cities and towns.
Central Falls is now moving to state receivership as duties of the court-appointed temporary receiver are taken over by Pfeiffer. The transition will take weeks rather than months, according to Gallogly.
“They will be doing an assessment of the budget situation as well as other aspects of the city government,” she said. “The budget is the first priority. Determining both the expenditure level and the revenue levels that are needed to bring the city back to stability.”
The receiver and his team — which currently includes a state official along with two consultants experienced in working with fiscally distressed municipalities in neighboring Massachusetts — will work on a multi-year budget plan.
Though issuing deficit bonds is a possibility for the city, it’s not being considered at the moment, Gallogly said. Deficit borrowings require state approval, must be repaid within five years and come with conditions attached such as a requiring municipalities to make multi-year financial projections.
“That is an option but obviously the amortization of deficit-funding bonds would need to be worked into a multi-year plan,” she said.
As receiver, Pfeiffer has the power to recommend a federal bankruptcy filing. That isn’t being contemplated right now, Gallogly said.
Instead, they expect that once fiscal stability is achieved the state will “step down” the process, moving the city into less restrictive financial oversight with either a budget commission or fiscal overseer, as allowed under recent legislation.
“If things turn around very quickly ... maybe we can skip the budget commission and go right to fiscal overseer, but I don’t believe that we would go right from receiver to totally out,” Gallogly said.
Two Rhode Island municipalities issued deficit debt earlier this month: Woonsocket sold $11.5 million of bond anticipation notes and North Providence sold $10.5 million of deficit bonds.
In May, Moody’s Investors Service and Standard & Poor’s cut Central Fall’s rating to junk.
Moody’s analyst Conor McEachern said in an e-mail that he couldn’t comment on the credit beyond what had been published in the rating reports and that he looked forward to “discussing the transition to state receivership with them soon.”
The city has $17.1 million of rated debt outstanding. Earlier this month, it repaid $4.1 million of tax anticipation notes and last month sold $4.25 million of qualified school construction bonds.