Central Falls’ tab for top 20 creditors is $651K

Since the Great Recession hit, concrete contractor Cardi Corp. has been cautious with extending credit to its customers. For a long time, Cardi executives worried about private businesses. Last week they found reason to start scrutinizing municipalities with the same vigor.
On Aug. 1, Central Falls filed for Chapter 9 bankruptcy. As part of its filing, the city listed its top 20 creditors. Cardi took No. 3 on the list, with an outstanding $80,828 bill for roadway paving.
Receiver Robert G. Flanders, who filed the lawsuit, said the list was required as part of the filing and is no indication that the city plans to skip on its bills, which could grind city services to a halt.
“Our hope is that they will get paid,” the retired R.I. Supreme Court justice said in an interview with Providence Business News.
Stephen Cardi Sr., the treasurer of the concrete company, hopes Flanders is right. The bill is sizable for the Warwick firm. And a bankruptcy filing by a Rhode Island city is unprecedented and left Cardi and other creditors wondering what comes next.
“What do you do?” Cardi said. “You just be a little more selective in [how] you bid.”
Flanders and Theodore Orson, an attorney assisting Flanders, said last week that they expect the list to change as the bankruptcy team wades through accounts payable. The team must still add debts associated with the school department.
The team also wants to put retirees on the list. Orson told a U.S. Bankruptcy judge last week that will mean calculating the total benefits the city expects to pay all 141 of its retirees. To do so, actuaries need to sort through a host of different plans and gather information from retirees.
Adding retirees and school-department costs could significantly boost the amount owed to the top 20 creditors that last week showed just $651,411 in debts – a tiny sliver of Central Falls’ financial woes.
“The real problem here is not in paying our trade creditors,” Flanders said. “It’s in dealing with these unsustainable pension and labor obligations that we’ve incurred.”
The city carries $80 million in unfunded pension costs. It has a structural deficit of about $5 million on a $16.4 million budget. It has carried over a $2.3 million deficit from the fiscal year that ended June 30.
In an attempt to stave off a financial crisis, Flanders – and his predecessor Mark Pfeiffer – raised taxes and slashed city services ranging from recreation hours to overtime for police. Flanders also sought to renegotiate pensions for retired city workers. When he proposed a plan that would have saved $2.5 million annually, but slashed pensions by as much as half and raised retiree health care costs, the retirees and their survivors balked, saying they needed more time to review the concept.
But Flanders said there was no time; the city was running out of cash. After filing for bankruptcy, he unilaterally adjusted pension benefits. And he is seeking to void contracts with the city’s police, fire and municipal-worker unions.
He is not seeking to void day-to-day contracts such as those for office supplies. Flanders said those contracts cost the city a paltry amount in the grand scheme of the city’s troubles.
Flanders says the city has the cash to pay its day-to-day bills and, on the day of the bankruptcy filing, anticipated no interruption to services provided to the city. And he sought to reassure companies to which the city owes money that Central Falls will not skip on paying its bills.
Some creditors say they understand the difficult situation Central Falls faces. The city owes the R.I. Resource Recovery Corporation $48,564, primarily for dumping trash at the state’s central landfill. Corporation Executive Director Michael OConnell said there are no plans to stop letting garbage trucks from the city unload at the landfill.
“We expect to be paid and we’ll work with them,” he said.
When the city fell behind on its bills last year, the corporation withheld profit-sharing from the state’s recycling program and applied it to Central Falls’ bill. OConnell said a similar arrangement could be made again if required.
Also willing to hammer out an arrangement is the Narragansett Bay Commission, owed $7,784 for sewer bills. Spokeswoman Jamie Samons said the commission is also aware that of all the issues facing the city “their sewer bill is probably pretty far down” on the priority list.
Some creditors also face an uncertain future themselves. Intercity Maintenance and Restoration Inc. is owed $156,242. Intercity and a sister company, Certified Disaster Restoration Corp., boarded up more than 200 abandoned properties under a no-bid contract from the city.
State police and the FBI are investigating the contract to the firms headed by Michael Bouthillette, a childhood friend and campaign contributor of Central Falls Mayor Charles D. Moreau. &#8226