For the first time, a public pension plan files for bankruptcy

April 25th, 2012 at 9:54 am by under Nesi's Notes, On the Main Site

This story is ricocheting around the world of public finance today. Darla Mercado reports for InvestmentNews:

In what’s believed to be a first by a public pension plan, the Northern Mariana Islands Retirement Fund filed for Chapter 11 bankruptcy protection on Tuesday.

The public defined-benefit plan is in a big hole. At the moment, it’s only 38.8% funded, thanks to low investment returns and a benefit structure that’s been increased without raises in funding ….

Marcia Wagner, managing director at The Wagner Law Group, believes that this is the first time a public pension plan has filed for bankruptcy. Notably, this is a restructuring of the fund and not a liquidation, which would be under the jurisdiction of Chapter 7 of the U.S. Bankruptcy Code.

The development of the restructuring will set a precedent, particularly at a time when local government budgets and defined-benefit plans are under strain.

For Rhode Islanders, at least two things are immediately striking about this story.

First, the Mariana pension plan’s funded level of 38.8% is actually better than Providence’s pension plan, which is 32% funded, and other plans in places like Cranston and Coventry are in far worse shape than that.

Second, this will test a novel legal theory that it’s possible for pension funds filing for bankruptcy as a separate entity from the government that set them up. That would allow Providence’s pension fund alone to file for bankruptcy without the capital city going into Chapter 9.

The story is also a reminder that Rhode Island isn’t alone in having a unique pension-plan design. The Mariana fund “permitted the grandchildren and great-grandchildren of the first generation of retirees to receive benefits after the original retiree died,” Mercado writes.

Meanwhile, the Providence City Council’s far-reaching pension overhaul, which includes a multi-decade COLA freeze, passed out of committee on Tuesday evening. The full City Council is scheduled to vote on the measure at a special meeting Thursday night. And the Projo obtained the mayor’s alternative offer to retirees.

• Related: Prof: Providence retirees may face 73% haircut in bankruptcy (Feb. 22)

Borders won’t close store at Cranston’s Garden City

March 17th, 2011 at 10:49 pm by under General Talk

Update: Borders in Cranston has won a reprieve. The company took the Garden City store off its list of locations to be closed Friday morning, less than 24 hours after it was put on the chopping block. (That list was removed from Borders’ website today.) The original post is below.

Update #2: A Borders spokeswoman tells me Garden City agreed to a new lease that will allow the company to stay put.

Borders will close its store at Cranston’s Garden City Center in May, has confirmed.

The bankrupt bookseller added 28 more locations this evening to the list of stores it plans to close, and Cranston was on the expanded list. The company said the Garden City store will close by late May.

“We reached the determination about these stores after a further review of their ongoing economic viability,” Borders spokeswoman Mary Davis said in a statement quoted by Reuters.

The Cranston store had 30 employees as of 2009, according to R.I. Economic Development Corporation records. Borders had another 45 employees at Providence Place mall and 30 at Warwick’s T.F. Green Airport, according to the EDC.

Borders initially announced Feb. 16 that it would liquidate about 200 locations. At that point, no local stores were slated to be shuttered.

Borders filed for bankruptcy in February following years of sliding sales and a failure to capitalize on the rise of e-bookselling.

The company’s other local stores – at Providence Place and T.F. Green, and in North Attleboro, Mansfield, Taunton and Swansea – are still scheduled to remain open under the company’s current plans.

Garden City Center, which opened in 1948, has lost two other major anchor stores since the recession began in 2007: retailers Circuit City and Linens n’ Things also closed there after their own bankruptcy filings. Garden City is managed by The Wilder Companies of Boston.

(photo: Borders)