PROVIDENCE – The receiver for the bankrupt city of Central Falls plans to present a fiscal correction plan by the end of the month that may include laying off up to 40 percent of the city’s municipal workforce.
State-appointed receiver Robert G. Flanders made his first court appearance Wednesday since Central Falls filed for Chapter 9 bankruptcy on Monday.
Flanders’ attorney, Theodore Orson, painted a grim picture of the city’s finances. Central Falls faces $80 million in unfunded pension costs and is trying to close a $5 million budget gap on a budget of $16.4 million.
Despite deep cuts in city services and tax increases, the receiver “had no choice” but to declare Central Falls bankrupt, Orson said.
In a break during the hearing, Flanders said he would deliver a plan to right the city’s finances within 30 days, and it may include laying off up to 50 of the 123 municipal employees, excluding school teachers and staff.
Flanders said he wants to complete any plan within six months and return the city to fiscal stability.
Speed was a goal reiterated throughout the hearing that stretched on for much of the day.
U.S. Bankruptcy Judge Frank J. Bailey started the hearing by promising a “swift and sure resolution” to the case.
“It will never be because of me or my chamber staff that this case lingers,” he said. “To some extent it’s up to the debtor and up to all the parties to dictate the pace.”
Orson told the judge that pensions loomed as the largest issue in the case.
Last month, the city proposed cutting pension and health care benefits for its 141 retirees. The majority of the retirees said they needed more time to review the possible changes before signing off on them. But Orson and Flanders said the city was on the verge of running out of cash. So the city filed for bankruptcy and unilaterally imposed the changes anyway.
Now, Orson and Flanders are seeking to void the contracts with fire, police and City Hall workers as well. Orson argued that those contracts became void when the city filed for bankruptcy and will remain void unless Judge Bailey determines otherwise. (Lawyers for the unions and retirees implied in comments to the judge that they may contest the voiding of the contracts.)
And Orson stressed an ideal solution would be one agreed on by everyone, and hailed the retirees and city employees for their cooperation so far.
“The employees or the unions are not the problem here,” Orson said. “They are good, hardworking people.”
During a break in the hearing, Flanders blamed elected officials for being too generous in signing off on past employment contracts.
Flanders said he was open to alternative solutions, a point reiterated by Orson in his comments to the judge.
Orson challenged lawyers who represent unions and retirees to deliver an alternative plan within two weeks. But, he said, any plan must not exceed the city’s current $16 million budget, not compromise public safety, not rely on one-time fixes or “games” to close the deficit and must be “reasonable and feasible.”
“We don’t claim to have all the answers here,” he said.
It’s unclear if the plan will address the city’s troubled school department. Orson told the judge that a plan should include the department even though the state pays its entire budget because education is a local function. Also the city will soon need to start contributing to the school department’s budget due to an education funding formula passed last year by the General Assembly.
Separately, Flanders added that the school buildings were owned by the city and had long-term maintenance needs that must be considered moving forward.
