R.I. City Files For Bankruptcy Protection
August 2, 2011 by UPI - United Press International, Inc.
CENTRAL FALL, R.I., Aug. 2 (UPI) — The city of Central Falls, R.I., battered by debt and years of financial woes, has filed for bankruptcy protection.
Robert Flanders Jr., who took over the city’s government last year as a receiver, filed for Chapter 9 bankruptcy protection Monday, The Boston Globe reported Tuesday.
Among other problems, Central Falls has Rhode Island’s highest unemployment rate — about 15 percent — and the state’s lowest per-capita income, data indicate. It made headlines last year when its under-performing high school fired, then rehired, its entire faculty. When Flanders took over the city as a state receiver, local elected officials became advisers.
“The current situation is dire,” said Gov. Lincoln Chafee when announcing the bankruptcy filing, “and it necessitates decisive steps to put the city back on the path to solid financial footing and future prosperity.”
The city of 19,000 is on track to end the fiscal year next June 30 with a $5.6 million deficit, based on projected revenues of $16.4 million and projected expenses of more than $22 million, court filings reveal.
Chapter 9 bankruptcy is reserved for municipalities as a reorganizational bankruptcy, during which the municipality or the debtor can restructure its debts to its creditors.
Municipal bankruptcies are “extremely rare,” New York bond lawyer Brian Fraser of Richards Kibbe & Orbe told the Globe.
“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.