Central Falls, R.I. Files Bankruptcy
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Central Falls, R.I., Files Bankruptcy

August 2, 2011


Central Falls, R.I., may be a small municipality, but it's currently facing some large financial challenges. Monday, Robert Flanders, Jr., the receiver in charge of the local government, filed Chapter 9 bankruptcy on behalf of the city.

The move comes amid a slew of problems the city has been saddled with as of late.

Central Falls currently suffers from the state's highest unemployment rate at nearly 15 percent, while also claiming the state's lowest per capita income. Last year, the city’s high school laid off its entire faculty before rehiring them. Last year also marked Flanders' takeover as city receiver, an unelected position placing him in charge of the Central Falls' government with elected officials acting as advisers.

Rhode Island Governor Lincoln Chafee spoke with the Boston Globe about the city’s financial state.

"The current situation is dire, and it necessitates decisive steps to put the city back on the path to solid financial footing and future prosperity," said Chafee.

Current projections suggest Central Falls will reportedly finish the fiscal year next June with a $5.6 million deficit, generated by $22 million in expenses and only $16.4 million in revenues.

Once a hub for textiles, metal workers and other manufacturers, the city lost many of its major employers after a series of plant closures and layoffs in the 1990s. The Wyatt Detention Facility now serves as the area’s most popular employer.

New York bond attorney Brian Fraser told the newspaper that municipal bankruptcies are "extremely rare."

While Orange County, Calif., went through what many consider a successful bankruptcy in the 1990s, Vallejo, Calif., has yet to emerge from a bankruptcy it filed in 2008. Instead, Vallejo has racked up millions of dollars in legal fees.

"The jury is still out on how effective Chapter 9 is in solving very deeply embedded financial problems like those in Central Falls," Fraser said.

Central Falls has eliminated health benefits for elected officials and closed both the town library and community center in an attempt to cut back on spending. The city’s fire department has lost nearly 10 percent of its staff since last year.

In other cutback attempts, state officials failed to reach a deal for union concessions with police, fire and municipal employees. They were also unable to convince city retirees to settle on lower pensions and benefits. Central Falls currently has 141 individuals drawing pensions.

Residents have expressed frustration over higher taxes and the city’s inability to solve its budget crisis. As such, filing bankruptcy no longer remains an embarrassing option to their financial troubles.

"This didn't happen over weeks, or even months," one resident told Boston Globe reporters. "At this point, what can we really do?"

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