Rhode Island town declares bankruptcy
Central Falls, R.I., filed for bankruptcy on Monday. As part of the process, collective bargaining agreements with city employees, including police officers and firefighters, could be overturned, changes have been made to employee health care plans, and pension payments to retired employees have been reduced.
Central Falls Receiver Robert Flanders announced Monday that Central Falls filed for Chapter 9 bankruptcy in federal court. Flanders said that he had filed a motion to immediately reject the collective bargaining agreements with the police and firefighters’ unions, as well as the municipal workers’ union. Under the bankruptcy restructuring, active employees and retirees will pay a higher deductible on their health care plans, as well as higher co-payments and a 20 percent co-share of premiums. The next pension payments, which would be received at the end of August or early September, will be reduced by no more than 50 percent for retirees receiving a pension for more than $10,000.
Flanders also promised that, from the ashes of bankruptcy, Central Falls will rise again,” albeit as a “slimmer, sleeker city.” “Everything was done to avoid this day,” Flanders said in a statement. “Services have been cut to the bone. Taxes have been raised to the maximum level allowable. We negotiated with Council 94 and the police and fire unions, without success, attempting to reach voluntary concessions, and we tried in vain to persuade our retirees to accept voluntary reductions in their benefits.”
Gov. Lincoln Chafee said in a statement that the course of action would be difficult, but “the current situation is dire, and it necessitates decisive steps to put the city back on a path to solid financial footing and future prosperity.”
Also, according to a Wall Street Journal article, a law enacted by Rhode Island recently guarantees that the city’s bondholders will receive their money first. The law was passed to ensure that investors are not scared away from buying bonds from other Rhode Island municipalities because of the possibility of bankruptcy.