Rhode Island Gov. Lincoln Chafee Tuesday said Central Falls must act quickly to get its finances in order so it can maintain critical city services.
Central Falls has been in receivership since May 2010. Retired Supreme Court Justice Robert Flanders, the receiver, met with the governor last week and told him the city needs to implement changes in order to address its fiscal challenges.
“I told him that the city’s financial position hasn’t really improved from when I took over initially [on Jan. 31] and that it was going to continue to spiral downwards unless we took some actions to try and correct that situation,” Flanders said in a telephone interview.
Possible initiatives include selling or leasing city assets, negotiating with unions and city employees to reduce salaries and benefits, sharing services with neighboring localities, and persuading vendors to work with the city at lower costs, Flanders noted.
Central Falls has a structural deficit of $5 million in an annual budget of $17 million. In addition, the city’s unfunded pension and retiree health care benefit liability totals $80 million. Flanders said the city is not in danger of missing payroll and-or skipping debt-service payments.
“I don’t think that is imminent, but we can’t go on indefinitely,” he said.
In his fiscal 2012 budget proposal, Chafee requested that the state legislature allocate nearly $5 million to Central Falls to help it fill its shortfall. Flanders said the city must plan in the event that lawmakers fail to provide the funding.
“Recent reports I have received from Justice Flanders indicate that we do not have the luxury of time to correct the chronic and long-standing financial challenges in Central Falls,” Chafee said in a statement. “Therefore, I have authorized Justice Flanders to take whatever steps he deems necessary, including expediting options that will assure residents of Central Falls with continued access to essential public safety services.”
Rhode Island-based Municipal Management Solutions will assist the city in finding ways to decrease expenditures. Central Falls will pay the firm $23,000 per month for its financial advice, Flanders said.
The city’s $23.4 million of outstanding general obligation debt has been downgraded to below investment grade.
