What is Judge Flanders going to tell us Monday morning?
That’s the question everyone is asking this afternoon after most of Central Falls’ retirees failed to agree to the reductions in their pensions proposed by Flanders, the city’s state-appointed receiver.
Flanders is now “deciding upon the best possible course of action to put the City of Central Falls on solid financial footing,” according to a statement issued earlier today. “An announcement is expected Monday morning.”
That announcement will presumably take the form of a press conference in the cash-strapped city. The Chafee administration has put in place a news blackout until then, and spokesman Christian Vareika declined to break it when I called him. “We expect speculation,” he said.
You don’t need a crystal ball to know most of that speculation revolves around whether Flanders plans to pull the trigger and have Central Falls file for Chapter 9 bankruptcy early Monday. Governor Chafee briefed lawmakers about the situation on Thursday, the Projo’s Kathy Gregg reports.
Bankruptcy would help by giving the city more leeway in renegotiating contracts, but a Chapter 9 filing could also do further damage to the state’s image, Chafee said Tuesday during a taping of WPRI 12′s “Newsmakers.”
“So we’re trying to balance those two interests – what we can achieve in the laws of bankruptcy, with the perception of who is next and what bad things might flow from a bankruptcy in Central Falls,” the governor said. “We’re trying to balance those and avoid bankruptcy if we can.”
“It’s a high priority for the administration,” he added.
After the meeting with retirees earlier this month, Flanders emphasized that bankruptcy would be all but inevitable if he did not get most of them to agree to pension concessions. “If a substantial number say no, then bankruptcy becomes a much more likely option,” he said. “Then it’ll be up to the bankruptcy judge.”
Asked if there was another way to avoid Chapter 9 without the pension concessions, Flanders replied: “I don’t know of one right now.”
Not that Flanders has ever minced words about the situation in Central Falls.
Last month, he told me bankruptcy was “more likely than not” and that a decision would be made “certainly no later than the end of August … and perhaps much sooner.” In May, he said “the bankruptcy option looms much larger” unless state lawmakers provided a bailout (which they didn’t) or workers and retirees agreed to major concessions.
That doesn’t mean a bankruptcy filing is a certainty come Monday. Deadlines have a way of clarifying things in people’s minds, and sometimes a deal gets reached that wouldn’t have been possibly until the eleventh hour. And Flanders could decide Chapter 9 still isn’t the best solution there. But a filing does seem more likely than not.
If Central Falls does file for bankruptcy – which happens in federal court, not state court – the judge for the case will be appointed by Chief Judge Sandra Lynch of the 1st U.S. Circuit Court of Appeals in Boston, according to Flanders’ office. It won’t necessarily be Judge Arthur Votolato, the U.S. Bankruptcy Court judge for the District of Rhode Island.
For more on what would happen next, read my May Q&A with Chapter 9 attorney James Spiotto. “It is not a pleasurable experience,” he said. “It’s difficult and hard, and it’s stressful for everyone.” It’s also expensive – Vallejo, Calif., has spent more than $10 million since filing for Chapter 9 in 2008 and is still trying to get out.
More coverage of the Central Falls crisis on Nesi’s Notes: