PROVIDENCE – Superior Court Associate Justice Michael A. Silverstein issued a written decision Monday morning upholding the constitutionality of the 2010 law that created a state receivership to take charge of financially-distressed municipalities such as Central Falls.
In a wide-ranging 48-page decision, Silverstein said the state’s appointment of receiver Mark A. Pfeiffer to Central Falls does not violate the Rhode Island Constitution and, in fact, is “necessary for the welfare of the state and its inhabitants,” as the General Assembly claimed when it enacted the receivership law in June.
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“With many of Rhode Island’s municipalities already financially stressed, the General Assembly determined that receivership proceedings – such as the one Central Falls had entered – were not in the best interest of the citizens of Central Falls and threatened the financial well-being of Rhode Island and its other municipalities,” the decision states.
The new law essentially removed the courts from the municipal receivership process, instead giving the state the authority to appoint representatives to oversee the management of a city or town in financial distress. After enactment of the law, the state named Pfeiffer to replace a temporary receiver who had been appointed by the courts, Jonathan N. Savage.
Mayor Charles Moreau and the Central Falls City Council then went to court to challenge the state appointment on constitutional grounds. Pfeiffer, who had Moreau relinquish his city vehicle, cell phone and keys to City Hall, told the mayor in July that his role from now on would be advisory only and Pfeiffer proceeded to make appointments to city boards that Silverstein also upheld in his decision Monday morning.
“The fiscal collapse of a municipality can affect the entire state’s financial interests,” the decision states, finding that “irreparable harm’ will ensue if the mayor and city council are not enjoined from making further appointments and if the receiver is hindered from doing his job. If the city’s fiscal instability continues, any harm to the mayor or council would be “far outweighed” by harm to the city and the state, Silverstein said.
“The Court holds that the Act applies alike to all cities and towns, addresses a statewide concern, does not alter a municipality’s form of government and is substantially related to public welfare,” the decision concluded. Sufficient “safeguards” are built into the law, Silverstein said, to guide the future administration of Central Falls and “prevent against arbitrary and capricious actions.”
The decision recounts the elements that led to what it called Central Falls’ “extraordinary” fiscal crisis, including: a June 30, 2009, audit that showed city’s total assets at “negative” $16.9 million; an expected deficit of $8 million during fiscal years 2010 and 2011 combined; and a pension liability of more than $35 million, with no payments made to the pension fund in 2009 or 2010.
