Central Falls could be forced into bankruptcy within weeks if it doesn’t get an infusion of cash from the General Assembly or major concessions from its unions, the city’s state-appointed receiver has warned.
“Right now time is our biggest enemy,” Robert Flanders told WPRI.com on Thursday. Central Falls closed its 2009-10 fiscal year $1.9 million in the red, and the city only has enough cash to cover payroll and other expenses for about 10 days, he said.
Flanders is hoping state lawmakers will provide a quick infusion of funds by transferring $1.9 million from Central Falls’ state-funded school system to its municipal government. Failing that, he plans to approach the city’s police and fire unions and ask for deep cuts in their compensation to tide the city over.
“If we can’t do that, and we can’t get those agreements, then the bankruptcy option looms much larger,” he said, adding later: “I’m hoping that at a minimum we’re looking at months and not weeks [before bankruptcy might be necessary], but that is very much dependent on uncertainties.”
A failure to get money from the state or givebacks from workers wouldn’t push Central Falls into Chapter 9 immediately, Flanders said; first he would ask large taxpayers like National Grid to speed up their tax payments to the city, which they agreed to do last year, and seek ways to juggle bill payment.
“The objective here is to try to avoid pay-less paydays and defaults, but at the same time manage cash,” he said. “We could potentially extend this thing out for a while.”
Governor Chafee appointed Flanders, who had been chairman of the Board of Regents for Elementary and Secondary Education, as Central Falls’ receiver in February. The situation Flanders described sounded much like the one faced by General Motors and Chrysler in the spring of 2009 – they wanted a government bridge loan to buy enough time to restructure their organizations.
“We’re basically looking to downsize Central Falls to the bare minimum,” he said. “All the so-called services that aren’t essential are on the chopping block.”
Flanders has ordered a study of Central Falls’ police and fire departments from the University of Massachusetts Boston’s Collins Center for Public Management that will offer options for cutting them without sacrificing public safety. He expects to receive it four or five weeks from now, and plans to offer a formal proposal to the police and fire unions after that.
Flanders said he is in talks about outsourcing all the city’s public-safety needs to a neighboring community like Pawtucket, Cumberland or Lincoln. He thinks it could be a win-win, providing new revenue for the other city while reducing Central Falls’ budget by cutting overhead.
“It’s basically, ‘Take my city, please’ – you know, Henny Youngman,” Flanders said.
The much-hyped possibility of annexation – that is, merging Central Falls into Pawtucket or another city – remains a possibility, but not a likely one in the short-term because it would likely require complicated constitutional and legal changes, Flanders said.
Another worry is the city’s so-called “John Hancock pension plan,” created in 1972 for police and fire retirees; actuaries tell Flanders it will run out of cash in October. Asked whether he worries retirees will resist deep benefit cuts even if the alternative is bankruptcy, Flanders replied: ”A haircut still looks a lot better than a beheading.”
At the request of Flanders’ predecessor, Mark Pfeiffer, the Chafee administration included $4.9 million in its 2011-12 budget proposal to close a deficit in Central Falls’ current $17 million budget. But “this appropriation does not solve anything,” Revenue Director Rosemary Booth Gallogly said in March.
Flanders also warned that the outcome of the crisis in the city he’s overseeing could have ripple effects across the state. ”This is not unique to Central Falls,” he said. “We’re just a little more advanced in the process.”
Despite the grim situation, Flanders expressed the hope that the lessons learned in Central Falls could help provide a blueprint for other communities. ”It’s like the manager who takes over the last place team,” he said. “There’s opportunity all around.”
Related: What filing for Chapter 9 bankruptcy would mean for Central Falls