Flanders: Central Falls bankruptcy now ‘more likely than not’June 22nd, 2011 at 7:00 am by Ted Nesi under Nesi's Notes
The House Finance Committee’s refusal to pony up money to cover Central Falls’ budget deficit means the cash-strapped city may file for Chapter 9 bankruptcy before the end of the summer, its state-appointed receiver says.
“I think it’s more likely than not,” Robert Flanders told WPRI.com late Tuesday. “I don’t want to handicap it beyond that, because I want to give everybody a chance to step up here.”
Flanders is trying to secure large concessions from the city’s unions to avoid a Chapter 9 filing in federal court. He said the city is “rapidly running out of cash” and the denial of a state bailout will require the talks to move even faster.
“There are going to be very big ‘asks,’ so it’s hard to be optimistic about it,” he said. “On the other hand, bankruptcy could be even worse, and as I’ve said before, a haircut still looks better than a beheading.”
The finance committee approved a budget proposal last Friday that does not include $4.9 million Governor Chafee wanted to spend to buy more time for Central Falls to stabilize its finances. The city filed for receivership more than a year ago.
“I’m not surprised at all,” Flanders said. “The suggestion [from lawmakers] was, ‘We’ve got other distressed communities; why should we help Central Falls over the others? We’re already funding the [city's] schools to the tune of $42 million a year. Enough is enough.’ ”
House spokesman Larry Berman was not immediately available to comment on the finance committee’s decision.
Last week, Moody’s Investors Service downgraded Central Falls’ bond rating again and gave it a negative outlook, saying the city could default on its obligations early in the new fiscal year that starts July 1. Flanders acknowledged that’s a possibility.
A decision on whether to file for bankruptcy is likely to come “over the next several weeks – certainly no later than the end of August … and perhaps much sooner depending on our cash flow, how well we collect our taxes, how well we manage our other obligations,” he said.