The tiny, cash-strapped town of Central Falls, Rhode Island, is expected to know Monday whether it is officially bankrupt.Robert Flanders, the town’s state appointed receiver, will work through the weekend to decide whether he will file for bankruptcy on behalf of Central Falls, a senior advisor to Rhode Island Gov. Lincoln Chaffee told the AP today.
Flanders is still in last-minute negotiations with the city’s union retirees, who have been asked to accept voluntary cuts to their pensions and benefits. Flanders has said bankruptcy is likely if the retirees don’t accept about $2.5 million in concessions.
The deadline for union to decide was yesterday, but 57 of the 141 retirees have asked for more time to consult with lawyers and accountants, according to the Providence Journal. 30-seven retirees rejected the proposal and 35 others did not respond. Of the 12 who voted to accept it, nine would not have had their benefits reduced under the plan.
Central Falls faces a $4.9 million budget shortfall. The real financial problem, however, is the city’s $80 million public pension debt and it’s public safety worker pension fund is on track to run out by October.
A Chapter 9 municipal bankruptcy filing would give Central Falls the opportunity to change it’s union agreements. But it may also scare investors away from Rhode Island’s other municipalities, many of which are already on the brink of insolvency.
For more on municipal bankruptcy, check out our interview with Chapter 9 attorney Jim Johnston, who represented Orange County during its 1994 filing, the largest municipal bankruptcy to date.
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